Car allowance and fuel expense question.

[7heGeneral]

Hi all,

I've recently started a new job, and have decided to take the car allowance as opposed to a company car.

It's a 2.0 tdi and they pay me 11p per mile as per the governments tax rates ( https://www.gov.uk/government/publications/advisor... )

I'm thinking of selling up and buying a better (read thirstier) petrol powered car. Would the amount I claim as part of my business mileage impact the tax I pay on my salary / car allowance?

Cheers

[Matt UK]

The 11p/mile money you receive via expenses is not taxable, if that is what you mean.

Also, don't forget to claim your 45p/25p tax relief each year, well worth it

[Shakermaker]

11p per mile if you take a company car

You'll be using your own car which they give you money towards... There might be a higher per mile rate applied in this situation.

At work the company car users get 11p

Car allowance people get 23p

Non car allowance takers (only doing occasional miles for work) get the full 45p per mile.

And then i get some fancy tax wizardry done to reclaim the tax relief each month as well

[smithyithy]

Car allowance option ( which I take) is intended to cover maintenance / wear and tear too so the mileage rate tends to be the same as the company car option, depending on fuel / engine size - I get 11p for a 2.0 petrol.

If you don't get a car or allowance, but claim business mileage for a personal car, it tends to be at the higher 45p rate.

As mentioned, it's not taxable.

[7heGeneral]

Hi guys,

Thanks for the responses guys. I get 11p a mile as I get a car allowance. (can I still claim tax relief? - I wasn't aware of this...)

I suppose what I was really asking was if I get a massive v8 and then claim the 20p per mile, would I be impacted on y taxes. I'm assuming not going by the above posts...

Cheers

[softtop]

7heGeneral said:

Hi guys,

Thanks for the responses guys. I get 11p a mile as I get a car allowance. (can I still claim tax relief? - I wasn't aware of this...)

I suppose what I was really asking was if I get a massive v8 and then claim the 20p per mile, would I be impacted on y taxes. I'm assuming not going by the above posts...

Cheers

what is this 20p a mile you are claiming for?

[smithyithy]

From HMRC:

'Using a company car:
You can claim tax relief on fuel you have paid for when using a company car for business. If your employer has repaid you for some of the cost you can claim relief on the difference.'


I'm not actually sure how this works. Usually, the mileage rates are designed to give you just enough per mile to break even. Eg. my Mini averages 38mpg, with my mileage rate for business miles (which I do very few of, to be fair) I might earn a penny or two over a hundred mile round trip

But I'm not sure how / when I'd claim 'tax relief', as the mileage rates aren't taxed.

[7heGeneral]

softtop said:

7heGeneral said:

Hi guys,

Thanks for the responses guys. I get 11p a mile as I get a car allowance. (can I still claim tax relief? - I wasn't aware of this...)

I suppose what I was really asking was if I get a massive v8 and then claim the 20p per mile, would I be impacted on y taxes. I'm assuming not going by the above posts...

Cheers

what is this 20p a mile you are claiming for?

Im just going by what it says on this link .... https://www.gov.uk/government/publications/advisor...

I know it says for company car users, but in my expenses at work I get given 11p currently as I use a 2.0 tdi - which matches the rates indicated in the above link.

I'm assuming for a car over 2.0 litres (petrol) I'd be given 20p per mile.

I've never had a car allowance before, so just want to check I can change for a fun car thus claiming more fuel expense without it impacting the rest of my salary.

Edited by 7heGeneral on Tuesday 15th December 13:09

[smithyithy]

As far as I can see mate, you're correct. You'll get your monthly allowance for your car, which is taxed, then any business miles you do, you'll claim back through your employers expenses system, and you'll get reimbursed whatever rate per mile - this isn't taxed.

I do find it interesting that the mileage rate for >2000cc petrols is so high.

Look at diesels - 9p, 11p, 13p compared to petrol at 11p, 13p, 20p.

I wouldn't be surprised if it's dropped to 15p in the near future, but for the time being - go for it!

My calculations work it out that if you buy petrol at 105p/litre, and claim mileage at 20p/litre - you only need to average 24mpg to break even - which is pretty damn generous

When I had a little 1.5 diesel company car, I had to average around 50mpg to break even on the measly 9p/mile

[Eric Mc]

If your employer is paying you 11p per mile for using your own car, HMRC says that you can make a tax relief claim directly from HMRC for the balance of 34p per mile.

If you complete Self Assessment tax returns, you make the claim on the Self Assessment return.

If you do not, you have to make a separate claim directly to HMRC.

[smithyithy]

That would be the case if he wasn't receiving the monthly car allowance.

If it's your own car that the company isn't funding at all, then you can claim on the difference between the 45p/mile rate, and the amount the company reimburses you (10p/mile for example, so 35p difference).

If however, you have a company car, or a monthly car allowance (both of which are classed as Benefit In Kind - BIK - and are taxable benefits), then you get the lower mileage rate.

This is because they assume that the car allowance pays towards car cost (lease, finance, loan etc), tax, insurance, wear and tear. So they only have to pay for the actual fuel used for business use.

If it's your own personal car and you're not receiving any monthly allowance or other car benefits, then you apply for the 45p/mile rate because that covers fuel, wear and tear etc.

My employer would just pay the 45p/mile, rather than giving me less and expecting me to claim it back myself. This was the case when I first started and used my own car for a while, an old VW Polo. Driving to meetings etc during work hours I claimed back 45p/mile.

Now I have a car allowance (or the option of a company car), I can only claim back 11p/mile.

[theboss]

You're entitled to tax relief on mileage payments up to 45/25p whether you're in receipt of a 'car allowance' or not.

[smithyithy]

Right, I've got a few thousand miles worth of tax relief to claim back from 2012-2014

[Zigster]

A "car allowance" isn't a company car - you pay income tax on the allowance like any other cash payments your employer makes to do. You don't have to buy a car with that allowance, nor spend the whole of the allowance on a car.

If your employer chooses to give you less than 45p per mile (and mine recently reduced from 45p per mile to the various rates mentioned above) then you can put the difference on your tax return to reduce your tax bill.

[Eric Mc]

Exactly. The "car allowance" is a bit of a misnomer. What it is is "additional salary" that a person receives when they opt for or are told that they can only use their own personal car. Now, of course, sometimes the employer will specify the make and type of car that the employee can use - and may even be able to offer the employee a deal on getting the car at a good price. But the car is the property of the employee, not the employer.

[7heGeneral]

Thanks guys,

This makes me feel much more comfortable. I feel like fool and am kicking myself for trading in my Fiesta ST for a diesel A3 without actually doing any research first.

Now I guess I will wait to see where my next client is based and will see if I can find something more "fun".

Cheers

[smithyithy]

Also, make sure your company doesn't impose any limitations on what you can drive.

Although it is simply 'additional salary', because I take it in lieu of a company car, my employer limits what I can drive - <5 years old, <160g CO2, <100k miles etc..

[7heGeneral]

swerni said:

7heGeneral said:

Hi guys,

Thanks for the responses guys. I get 11p a mile as I get a car allowance. (can I still claim tax relief? - I wasn't aware of this...)

I suppose what I was really asking was if I get a massive v8 and then claim the 20p per mile, would I be impacted on y taxes. I'm assuming not going by the above posts...

Cheers

20p per mile isn't a great deal, I'd certainly think twice about running a V8 on it.
Mine averages 20 mpg, if I were on your rate I'd get £4 per gallon.
Dependent on your tax rate ( assume basic rate for this example ) I'd also get 20% back on 25p ( first 10k miles) and 20% of 5p there after.
The total amount I'd see would be (including rebate)
£5 per gallon for first 10k miles
£4.20 for any miles above 10k

That's meant to cover all your running costs and remember, petrol costs are very low at the moment, wasn't long ago when they were 50% higher........

Also note after the first year your tax code will change and they assume you will do the same mileage and they'll build it into your tax code.

What's kind of mileage so you intend to do?

The A3 sounds like a good move.

Thanks for this. Maybe a V8 would be pushing it, but how about something like an S3 (MY09+)? 30-35mpg should be doable at about 70 and it'll give me something a little more fun to drive on the weekends.

With regards to mileages, so far in the last 4 months I've done about 5500. About 85% have been on the motorway. I reckon I will do about 15000 in total.

With regards to the current A3 (170 Quatro) I'm just about breaking even with the 11p a mile I claim back, though I'm probably wrong, I'm assuming it wont cost me too much more to run something more fun.

With regards to my tax code, if I were to do less miles the following year do I get some money back?

[7heGeneral]

smithyithy said:

Also, make sure your company doesn't impose any limitations on what you can drive.

Although it is simply 'additional salary', because I take it in lieu of a company car, my employer limits what I can drive - <5 years old, <160g CO2, <100k miles etc..

I'm pretty lucky in this regard. I don't have any limitations on what I drive.

[smithyithy]

7heGeneral said:

I'm pretty lucky in this regard. I don't have any limitations on what I drive.

It's no worries, we've TUPE'd so many times since I took the allowance option, they've forgotten what the actual limitations are.

Ergo when I give my MINI back, I'll be getting an S2 Elise