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How does the whole business milage thing work in layman's terms.? I'm aware that I can claim 45p per mile (used my own car for a training course) but am I actually entitled to this and does the business then claim the expense back in tax at a later date.?
The business pays you the rate you agree on in your expenses policy.
That is then a cost to the business which can be offset in the accounts.
Most places will want to see that you have the required insurance on your car for business use and that things like TAX/MOT is up to date.
Beyond putting the claim in and getting the cash back unless your work in finance I'd not be worried about the rest of it
Just be sure you're covered from your company insurance wise. My place doesn't really like us doing it, they'd rather we hired a car, which is rather more expensive, but is easier for them compliance wise.
The company I work for only pays 40p a mile (I think can claim some tax back somehow on the missing 5p but I rarely do business miles so haven't looked into it). There's also a separate lower mileage rate if you do over 10,000km a year - again no clue what that links to but as has been said, if you work for a company then check their policy. I also need to net off my usual commute miles (but for me that's only a couple of miles) so if I'm going 60 miles on business I only claim for 58.
And for some reason we also need to provide petrol receipts which annoys me...
Your employer will pay you an agreed rate. Let’s call this 25p per mile. You are then entitled to claim tax relief on the difference up to 45p per mile (for the first 10000 miles) - so you’ll get a tax refund on the 20p difference. HMRC has a form for this (tax relief on expenses I think it’s called - google it).
The receipts are required so they can claim back the vat on the business use.
45p a mile for 1st 10k miles, then 25p thereafter (i think). You're entitled to it and it is untaxed.
You can be paid more, but it has to be declared as a BIK and taxed. Similarly, you can be paid less and claim tax relief on the difference.
Your employer will pay you an agreed rate. Let’s call this 25p per mile. You are then entitled to claim tax relief on the difference up to 45p per mile (for the first 10000 miles) – so you’ll get a tax refund on the 20p difference. HMRC has a form for this (tax relief on expenses I think it’s called – google it).
^^this. Your employer will pay you a set mileage rate. If that is less than 45p per mile you can claim the difference, up to 45p per mile, in tax relief at your normal tax rate. The form is P85 or claim through your normal tax return. I do it every year and is normally a few hundred quid, has been in the thousands that I’ve actually received back, worth doing imo.
if your employer pays more than 45p per mile you have to pay tax on the extra.
+1 to check your insurance. Most policies will be SDP + commuting to a single place of work. Driving to a training course would be deemed business use and potentially you would not be covered.
It's 45p per mile for the first 10,000 miles .
20p per mile thereafter ..that's from a self employed perspective ..
What wiganer said.
First 10k is 45p/mile, 25p/m thereafter. Starts counting again on 5 April, not calendar year/company year/anything else.
Rates are different for motorbikes (i think 25p?) and are 20p/m for pedal bikes.
Add 5p/m per passenger.
VAT the company can reclaim depends on your engine size and fuel type.
To be honest, and I'm not being difficult, but I would just not use my car, mileage allowance or not, for company business.
If the company requires you to go out, then it either provides a taxi, a train ticket, a pool car or a hire car.
No if's, no buts.
My car is paid for by me for my business, risk etc, etc.
To be honest, and I’m not being difficult, but I would just not use my car, mileage allowance or not, for company business.
......
My car is paid for by me for my business, risk etc, etc.
I know a few people who use mileage to pay for their car, do enough miles and you get a big chunk of a resonable used car paid for tax free, nice little earner if you can get it.
I know a few people who use mileage to pay for their car, do enough miles and you get a big chunk of a resonable used car paid for tax free, nice little earner if you can get it.
+1, my cars been paid for by business miles several times over. Once its paid for its pretty much profit after petrol.
I also need to net off my usual commute miles (but for me that’s only a couple of miles) so if I’m going 60 miles on business I only claim for 58.
Is there any official guidance on that?
I have a long commute of 25-30miles so can save a fair chunk of cash by riding in as often as possible. So I would argue that if I'm asked to drive somewhere else in my own car then the commute is an additional cost to me and therefore an expense.
I suspect my boss would pull me up for taking the piss long before HMRC. But would be interesting to know if there's official guidance on that situation.
Usually I just compromise and claim for the work 'trip' I.e. home -> location -> office is claimed, then office -> home isn't.
My entire company is moving across to own car business miles, but it's being done through a private contract hire arrangement facilated through the business and a third party specialist.
I've run company cars for over 20 years now and feel a bit uncertain about the new system, but the numbers stack up and it should be better for everyone all round.
This has been specifically done because the new co2 testing regime and tax escalation on company cars is going to get fairly punitive in the next few years.
To be honest, and I’m not being difficult, but I would just not use my car, mileage allowance or not, for company business.
Depends. I have a car allowance* to buy my own car but I'm expected to use it on occasion for business, and to insure it accordingly. So while it's 'my' car, I don't think the company asking me to use it is unreasonable.
If it's purely your car with no contribution from the company then I can see your point of view, but the 45p/mile is supposed to compensate for that.
FWIW i don't get 45p/mile, I get 11p, and then claim tax back on the rest. 45p/mile for say a 100 mile round trip gets you £45, in which you'll use let's say 11 ltr of fuel (40mpg) @ £1.35/ltr = £15. So you're receiving £30 towards wear and tear and insurance, which doesn't seem unfair? Scale up to the 3700 business miles I did last year and that's £1100.
* not sure what the benefit of car allowance is as opposed to salary - none to me I can see, I can spend it all or not at all on the car, but assume it's tax efficient for the employer.
I know a few people who use mileage to pay for their car, do enough miles and you get a big chunk of a resonable used car paid for tax free, nice little earner if you can get it.
This.
If work gave me a company car, I get hit on tax and would likely only have a smaller car, so mrs_OAB would then have to buy a big one for all five of us / bikes / canoes etc. So a small (but new) car that costs me.
Instead, I average about 7-800 miles a month for work in my own car, for 10 months a year. So around £300 a month in 45p a miles. It costs me about £2-300 a month to 'do' those miles in tax, insurance, fuel, maintenance and buying the thing. So work 'pays' for my car - and it is 'free' to use at the weekend - and I get to drive a nicer, bigger car that is better suited to my family needs.
Most years I get close to the 10k a year miles - but work does hire cars occasionally and we do play a game of not going over the 10k/45p limit....
FWIW, extra business insurance for both myself and mrs_oab adds less than £30 to the annual policy.
Yeah I much prefer using my own car, far more convenient for a start + the pool cars we used to have were often minging inside
but I would just not use my car, mileage allowance or not
As others have pointed out, and I'm similar, my car's effectively paid for by my company, and I view it as getting to use it for free, eves and weekends.
Is there any official guidance on that?
Yes, HMRC give a specific example on this, travelling on business to a place that is not your normal place of work starts at your front door from HMRC’s perspective. So no deduction of normal commute necessary. Company policy however may state you need to deduct it, but again you can claim this as tax relief.
not sure what the benefit of car allowance is as opposed to salary
The benefit to the company is probably that it doesn't count towards your company pension.
The benefit to the company is probably that it doesn’t count towards your company pension.
Where I used to work made it conditional on various things. You had to opt out of paid overtime for example. It was also outside of things like pensions, redundancy calculations, pay rises and could be withdrawn at any point.
It was also sold as being better value than a company car, so ~£6k/yr car allowance after tax gets you a significantly better car than the company car you could get and then the company having to gross up your salary to cover the company car tax.
The benefit to the company is probably that it doesn’t count towards your company pension.
^^ this
The benefit to the company is probably that it doesn’t count towards your company pension.
Where the car is a need not a perk it means they can get you a car without upsetting pay structures and if you move to a role that does not have a car it's not a huge pay cut just a loss of the allowance - probably important to keep the 2 separate in some ways. As a company car would not contribute to a pension why should an allowance?