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Own car used for business mileage. Company reimburses less than the permitted 45p per mile. I know I can claim back on the difference either via self assessment or P87.
The question is: How much can be claimed? Is the difference between the 45p/mile and the amount the company paid or is it that amount multiplied by the highest applicable tax band?
e.g. 1000 genuine business miles excluding commuting. Company reimbursed 15p per mile = £150. Can I claim £300 tax refund from HMRC or only 20% of the £300? (or 40% for higher tax bracket earners)
No, you can claim tax only, so 20% or 40% of £300
Cheers, I should have guessed it would be the worst of the two options!
If you could claim the whole difference, then companies would stop paying mileage allowance and just let HMRC pick up the tab.
I didn't claim this for a few years. When I finally did it paid for my Giant Anthem X1. It felt like HMRC was giving me a free bike, although in reality I'd given them an interest free loan for a few years.
It's simpler than that, just put in how many miles and how much you've been reimbursed - HMRC does the rest.
I also work for a tight-arse company, another reason why I only travel in working hours.
Do your company really pay only 15p per mile? I'd be letting them arrange you a hire car. That's shocking.
Do your company really pay only 15p per mile? I’d be letting them arrange you a hire car. That’s shocking.
Actually it's 14p, I rounded up to simplify the example!
It’s simpler than that, just put in how many miles and how much you’ve been reimbursed – HMRC does the rest.
I assume that's on the P87, I can't see anything that advanced on the self-assessment page.
Are the company paying you a car allowance with your salary?
If not that is really tight. Everywhere I've worked own car usage has been paid at 45p per mile, or the old top rate.
When on a car allowance that tends to drop, we're now getting 35p as it was pointed out that it was costing us money to travel to sites.
You can claim back upto 4 years via the P87 forms, kicking myself as I forgot to claim back 16-17... I tend to leave it for a few years and treat as a savings account 😀
Isn't the figure added to your tax free allowance, so 1000 miles at 45p is £450 more you can earn before you hit a tax band - therefore you save 20% of the £450? By paying 14p/mile straight to you, the company is effectively paying 30%.
Probably totally wrong.....
The only other mechanism for HMRC (for the Self Employed) would be to take the £450 off your tax bill, which is surely too good to be true??
Are the company paying you a car allowance with your salary?
They do, but it'll barely cover a lease on a base spec Polo.
I'm just glad the company I work for haven't a clue (45ppm & reasonable car allowance with no age restrictions) 😎
I went through this 20 years ago with the IR. We either had allowance or company cars, but none were fueled. I took on IR to re-imburse 10p per mile to staff as non-taxable (allowed rate was lower), and after a prolonged time, including monitoring quite alot of our cars we got it (without penalty) - the staff then claimed the difference against tax (so 20% back). Not long after, the IR then released latest guidance and allowed 10p per mile (that's for straight fuel cost refund withut tax - the 45p rate is different).
Cost wise, you are looking at more like 20p per mile with fuel now, if your car hits 40 mpg 'on average'.
Isn’t the figure added to your tax free allowance, so 1000 miles at 45p is £450 more you can earn before you hit a tax band – therefore you save 20% of the £450? By paying 14p/mile straight to you, the company is effectively paying 30%.
Probably totally wrong…..
The only other mechanism for HMRC (for the Self Employed) would be to take the £450 off your tax bill, which is surely too good to be true??
I thought it was £450 off your tax bill because it's a hard business cost. The gov reckons you lose 0.45p/mile - so why shouldn't it be completely off? You lose £0.45 every mile you drive - to perform business - before you make any gross/net profit on the job. It's an expense. I'd be interested to be corrected by a chartered accountant if there are any on this forum?
(They totally exempt commuting from the deduction. Has to be mileage to a (non commute) client or suppliers or whatever)
I thought it was £450 off your tax bill because it’s a hard business cost. The gov reckons you lose 0.45p/mile – so why shouldn’t it be completely off?
Read the link above. Yes, you can argue it should be, but reality is it's up to the company what it pays per mile. If the taxman made all the rest up then no-one would pay at all, and we the taxpayers would pay your employer's business miles.
You don't claim a tax refund, you claim a reduction of taxable income.
In the OP's example, the employer paid £150, HMRC think £450 is a reasonable expense, so you spent £300 of after-tax income on a business expense and you're due the tax on that at your marginal rate.
Nicely put. To spend that extra on top £300 you have to earn £375 because the taxman took 20% of it.
In a bizarrely compassionate moment the taxman has decided that isn't right, and lets you have it back.
Meanwhile you still spent the other £300, to use your car for doing your employer's work. Your employer has almost literally taken food out of your kids mouths!!
Worth noting if you have a company passenger you can claim an additional 5 pence per mile.