Car allowance / fuel card / self-assessment questions
Discussion
Hi All,
My wife has started a new job whereby she will be having to travel for work, albeit not actually that much (1 day a week max). The company have offered her a car allowance of £3k p/a to cover things such as depreciation etc.
However when it comes to fuel, they have told her that she has tweo options:
1. Take a fuel card and log her business mileage. The personal mileage covered (potentially the majority!) will then be deducted from her pay pack. This sounds okay apart from the fuel card is a very obscure one and there are hardly any filling stations that will take it, thus it will be very inconvenient.
2. Claim mileage at 25p/mile as and when incurred however she would then have to go on self-assessment(?!?).
Can anyone help?
My wife has started a new job whereby she will be having to travel for work, albeit not actually that much (1 day a week max). The company have offered her a car allowance of £3k p/a to cover things such as depreciation etc.
However when it comes to fuel, they have told her that she has tweo options:
1. Take a fuel card and log her business mileage. The personal mileage covered (potentially the majority!) will then be deducted from her pay pack. This sounds okay apart from the fuel card is a very obscure one and there are hardly any filling stations that will take it, thus it will be very inconvenient.
2. Claim mileage at 25p/mile as and when incurred however she would then have to go on self-assessment(?!?).
Can anyone help?
Regarding Option 2 - Claiming mileage at 25p per mile.
I assume you mean by that that her employer will reimburse her for her work related driving at a rate of 25p per mile.
If that is the case, a number of things need to be considered.
Travel from her home to her normal place of work is looked on as the "normal commute" and if she reclaimed that from her employer she would be taxed in full on the 25p per mile she received in respect of those specific journeys.
Travel on behalf of her employer to clients/customers/business contacts etc is totally different and if she claims 25p per mile for THAT type of travel, then she will NOT be taxed in any way. HMRC allows an employee to claim up to 45p per mile from an employer for work related motoring costs for the first 10,000 miles and 25p per mile for all miles above 10,000.
In fact, if the employer is only paying 25p per mile, then for those first 10,000 miles she is missing out on a possible additional 20p per mile tax relief claim.
In those circumstances, she CAN, if she wants to, make a claim to HMRC for the missing 20p per mile.
Note that HMRC will not give her the actual mileage amount but the TAX RELIEF on that mileage. So, if she had 5,000 miles she wanted to claim for, at 20p per mile, she could make a claim for the tax relief available on £1,000 (5,000 miles at 20p per mile).
How much tax relief she gets depends on the rate of tax she pays.
If she is only a basic rate tax payer, her tax bill will decrease by £200 (£1,000 @ 20%).
If she is a higher rate tax payer, the tax bill would go down by £400 (£1,000 @ 40%).
If she is a top rate tax payer, her tax bill will go down by £450 (£1,000 @45%).
One way to obtain this tax relief is to complete a self assessment tax return. However, a separate claim can be made using the HMRC Form P87.
Regarding the £3,000 "Car Allowance", that is just treated as additional salary and will be taxed under the PAYE system in the normal way. It will also be subject to Employee's Class 1 NI deductions.
I assume you mean by that that her employer will reimburse her for her work related driving at a rate of 25p per mile.
If that is the case, a number of things need to be considered.
Travel from her home to her normal place of work is looked on as the "normal commute" and if she reclaimed that from her employer she would be taxed in full on the 25p per mile she received in respect of those specific journeys.
Travel on behalf of her employer to clients/customers/business contacts etc is totally different and if she claims 25p per mile for THAT type of travel, then she will NOT be taxed in any way. HMRC allows an employee to claim up to 45p per mile from an employer for work related motoring costs for the first 10,000 miles and 25p per mile for all miles above 10,000.
In fact, if the employer is only paying 25p per mile, then for those first 10,000 miles she is missing out on a possible additional 20p per mile tax relief claim.
In those circumstances, she CAN, if she wants to, make a claim to HMRC for the missing 20p per mile.
Note that HMRC will not give her the actual mileage amount but the TAX RELIEF on that mileage. So, if she had 5,000 miles she wanted to claim for, at 20p per mile, she could make a claim for the tax relief available on £1,000 (5,000 miles at 20p per mile).
How much tax relief she gets depends on the rate of tax she pays.
If she is only a basic rate tax payer, her tax bill will decrease by £200 (£1,000 @ 20%).
If she is a higher rate tax payer, the tax bill would go down by £400 (£1,000 @ 40%).
If she is a top rate tax payer, her tax bill will go down by £450 (£1,000 @45%).
One way to obtain this tax relief is to complete a self assessment tax return. However, a separate claim can be made using the HMRC Form P87.
Regarding the £3,000 "Car Allowance", that is just treated as additional salary and will be taxed under the PAYE system in the normal way. It will also be subject to Employee's Class 1 NI deductions.
Eric Mc said:
Regarding Option 2 - Claiming mileage at 25p per mile.
I assume you mean by that that her employer will reimburse her for her work related driving at a rate of 25p per mile.
Correct.I assume you mean by that that her employer will reimburse her for her work related driving at a rate of 25p per mile.
Eric Mc said:
Travel on behalf of her employer to clients/customers/business contacts etc is totally different and if she claims 25p per mile for THAT type of travel, then she will NOT be taxed in any way.
Yes it is just this. Eric Mc said:
Everything else said by Eric Mc
Brilliant information. Thank you for confirming.One internet beer token to you sir
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