Car Allowance AND 40p a mile?
Discussion
IIRC if you use your own car. (bought or leased) on company business you can be paid upto 40p for the first 10k then 25p there after without being taxed on it.
If your company pay less you can claim the difference back by filling out a really short form at the HMRC office.
I did
real easy and the guy was VERY helpful
If your company pay less you can claim the difference back by filling out a really short form at the HMRC office.
I did
real easy and the guy was VERY helpfulAny extra cash paid to an employee over and above their normal wages is treated by the Revenue as additional wages and will be subject to PAYE tax and Employee's and Employer's Class 1 National Insurance contributions. If this extra money is described as a "Car Allowance", that is totally irrelevant for tax purposes. It is just extra wages.
If your employer is paying you a Car Allowance, the assumption must be that you are driving your own car and not one supplied by the employer. On that score, no PAYE Benefit in Kind will be incurred.
As you are driving your own car, you are entitled to claim tax relief based on the business mileage undertaken in that car. The rate allowed is 40p for the first 10,000 business miles and 25p thereafter.
If the employer pays you mileage, you can only claim from the Revenue the difference between what the employer pays you and the 40p/25p per mile rates.
If he pays you OVER the 40p/25p rates, the excess WILL be taxed as a BIK.
If your employer is paying you a Car Allowance, the assumption must be that you are driving your own car and not one supplied by the employer. On that score, no PAYE Benefit in Kind will be incurred.
As you are driving your own car, you are entitled to claim tax relief based on the business mileage undertaken in that car. The rate allowed is 40p for the first 10,000 business miles and 25p thereafter.
If the employer pays you mileage, you can only claim from the Revenue the difference between what the employer pays you and the 40p/25p per mile rates.
If he pays you OVER the 40p/25p rates, the excess WILL be taxed as a BIK.
andy-xr said:
Is that off the back of my thread or happy coincidence?
Probably! But I am still unclear whether I can get BOTH the 40p/25p a mile AND an allowance for using my own car because I thought the 40p included the cost of both owning and running the car? On the one hand Eic says it is wages and on the opther than no BIK is payable????
Brown and Boris said:
andy-xr said:
Is that off the back of my thread or happy coincidence?
Probably! But I am still unclear whether I can get BOTH the 40p/25p a mile AND an allowance for using my own car because I thought the 40p included the cost of both owning and running the car? On the one hand Eic says it is wages and on the opther than no BIK is payable????
I would say standard practice is for companies to pay an allowance and they commonly vary between £250 and £750 month. The idea really is that this buys people out of their company car.
This payment is taxable through PAYE and both the employer and emplyee pay NI on it - so it's just like extra salary, although it's not taken into account if, for example, the company pays a percentage of salary into a pension fund.
You can then be paid anything for business mileage - commonly companies pay in the region of 15p, and you can claim the difference back from HMRC between that and the 40p/25p rates using simple form P87. Note you only get the tax back on the difference, so if you get 15p per mile then for the first 10K miles you could claim 40p, so you get 10p in tax back (if 40% tax payer).
You could be paid more than 40p, but the extra is then taxable.
You asked a question about you and your wife each claiming the full 40p on the same car - perhaps alternating your claims to get the maximum benefit. I don't see any reason why you couldn't do that as long as the trips qualified. HMRC does not ask for details of the car if you were paying yourself less, and if it's your own company then I can't imagine why the issue would be queried? Who would even know?
If it's your own company then it seems common to just pay yourself the full 40/25p - it's a way of paying yourself tax free. We do this, although I do wonder if it's a good idea as we're missing out on the rebate we'd get from HMRC if we claimed less.
Edited by Deva Link on Friday 7th November 09:47
Brown and Boris said:
andy-xr said:
Is that off the back of my thread or happy coincidence?
Probably! But I am still unclear whether I can get BOTH the 40p/25p a mile AND an allowance for using my own car because I thought the 40p included the cost of both owning and running the car? On the one hand Eic says it is wages and on the opther than no BIK is payable????
You will only be liable to a BIK charge if
a) the employer supplies the car to you
b) the employer supplies fuel to you
c) the employer supplies both a car and fuel to you
d) the employer pays some or all of the vehicle running costs on your behalf
If he does none of the above, no BIK arises.
If he gives you extra money in the form of additional wages which might be referred to as a "Car Allowance" in order that you can acquire and run a car in your own name - those additional wages are taxed as extra salary.
If the car is in your own name and you meet all the running costs out of your personal income, THEN you can make the 40p/25p mileage claims without any fear of a BIK being levied.
a) the employer supplies the car to you
b) the employer supplies fuel to you
c) the employer supplies both a car and fuel to you
d) the employer pays some or all of the vehicle running costs on your behalf
If he does none of the above, no BIK arises.
If he gives you extra money in the form of additional wages which might be referred to as a "Car Allowance" in order that you can acquire and run a car in your own name - those additional wages are taxed as extra salary.
If the car is in your own name and you meet all the running costs out of your personal income, THEN you can make the 40p/25p mileage claims without any fear of a BIK being levied.
Brown and Boris said:
andy-xr said:
Is that off the back of my thread or happy coincidence?
Probably! But I am still unclear whether I can get BOTH the 40p/25p a mile AND an allowance for using my own car because I thought the 40p included the cost of both owning and running the car? On the one hand Eic says it is wages and on the opther than no BIK is payable????
Car allowance: £6k
Fuel: 40ppm first 10k, 25ppm everything after that
I can (if I want to) come out of the car allowance and claim 53ppm from the company. But in my case it'll be too high a bill to justify
Eric Mc said:
You will only be liable to a BIK charge if
a) the employer supplies the car to you
b) the employer supplies fuel to you
c) the employer supplies both a car and fuel to you
d) the employer pays some or all of the vehicle running costs on your behalf
If he does none of the above, no BIK arises.
If he gives you extra money in the form of additional wages which might be referred to as a "Car Allowance" in order that you can acquire and run a car in your own name - those additional wages are taxed as extra salary.
If the car is in your own name and you meet all the running costs out of your personal income, THEN you can make the 40p/25p mileage claims without any fear of a BIK being levied.
Thanks Eruc that is very clear now.a) the employer supplies the car to you
b) the employer supplies fuel to you
c) the employer supplies both a car and fuel to you
d) the employer pays some or all of the vehicle running costs on your behalf
If he does none of the above, no BIK arises.
If he gives you extra money in the form of additional wages which might be referred to as a "Car Allowance" in order that you can acquire and run a car in your own name - those additional wages are taxed as extra salary.
If the car is in your own name and you meet all the running costs out of your personal income, THEN you can make the 40p/25p mileage claims without any fear of a BIK being levied.
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