Reply to: 40p per mile mileage

[NotAllThere]

No. That would mean less tax take, which won't happen under the current regime.

[aceboy]

As I am sure we have all noticed the cost of driving is rising, year on year, because of fuel rises, car tax, insurance...etc

Has anyone heard if the revenue has any plans to review the 40p per mile?

Thanks

[FunctionCall]

As the rate has not changed for several years, at the moment it is irrelevant whether or not your company's business year coincides with the Inland Revenue's tax year.

You obviously don't do over 10,000 miles a year....

[ASB]

I think the only way you can make it pay more by not claiming through company is if you manage to keep the £3,160 profit in the company, have other income not related to your company which allows you to claim back the £1,600.

I think you need to have to either retain it or distribute to somebody who is not a higher rate taxpayer in order to gain a significant advantage. I guess it's a pretty unlikely position to be in

[minstrel]

Yes, but if you control the company and are outside IR35 and are a higher rate taxpayer you can manipulate it.

By claiming 0 you wil increase your profit by 4k for 10,000 miles, suffering an extra 800 odd quid in CT. Then claim the mileage on the personal return getting 1560 relief. Surely a good deal for the higher rate payer or have I missed something?

By my calculations...

If you claim £4k for 10,000 miles through the company you personally have £4,000 in your back pocket.

If you leave that £4k in the company, your profits increase by £4k, after 21% CT this is £3,160 which you can distribute as dividends.

If you are a basic rate tax payer and have non-dividend income you can offset the £4k mileage the company didn't pay you at 20%. £4k @ 20% = £800. Add the £800 to the £3,160 extra dividends you received gives you £3,960. Slightly worse off than if your company had paid the £4k straight.

If you are a higher rate tax payer I think it gets a bit more tricky, but it would be something like 25% additional HRT on the £3,160 which takes you down to £2,370. If you then add on the £4,000 @ 40% = £1,600 you can offset you get £3,970 - still less than the £4k if you'd gone through the company.

I think the only way you can make it pay more by not claiming through company is if you manage to keep the £3,160 profit in the company, have other income not related to your company which allows you to claim back the £1,600. This gives you £4,760 assuming you can then get the £3,160 out of the company without paying any more tax i.e. winding up company or drawing it out in a basic rate tax payer year.

Can't think of many situations where you would be higher rate tax payer and leaving the money in the company.

I could easily be wrong though...

[ASB]

It is not as simple asd that but yes, you would be able to claim aginst your income.

In the case you quote, lets say you had claimed 10,000 miles at 1p, so your claim from your employer was £100 - you could then make a claim on your tax return for the difference (39p X 10,000) being £3,900 - effectively this would reduce your tax bill by your top rate.

So if you are a 40% taxpayer the tax reduction would be £1560 - a 22% tax payer (assuming this was 2007/08 or prior) the tax reduction would be £858

So in short you do get some money back from Hector but not as much as perhaps you thought.

Alan

Yes, but if you control the company and are outside IR35 and are a higher rate taxpayer you can manipulate it.

By claiming 0 you wil increase your profit by 4k for 10,000 miles, suffering an extra 800 odd quid in CT. Then claim the mileage on the personal return getting 1560 relief. Surely a good deal for the higher rate payer or have I missed something?

[Nixon Williams]

What, so if my company only pays me (as an employee of my company) 1p per mile, the nice men in Hectorville will pay the other 39p per mile for me?

I don't think so!

It is not as simple asd that but yes, you would be able to claim aginst your income.

In the case you quote, lets say you had claimed 10,000 miles at 1p, so your claim from your employer was £100 - you could then make a claim on your tax return for the difference (39p X 10,000) being £3,900 - effectively this would reduce your tax bill by your top rate.

So if you are a 40% taxpayer the tax reduction would be £1560 - a 22% tax payer (assuming this was 2007/08 or prior) the tax reduction would be £858

So in short you do get some money back from Hector but not as much as perhaps you thought.

Alan

[51st State]

The Business Mileage Allowance for use of private cars for company business is set by the Inland Revenue. Currently it stands at a maximum of 40p and has been this figure for several years. The company itself can pay you less. But you can claim the difference from the Inland Revenue.
The Inland Revenue sets the rate for each Inland Revenue Tax year which runs from 6th april to 5th April.
As the rate has not changed for several years, at the moment it is irrelevant whether or not your company's business year coincides with the Inland Revenue's tax year.

What, so if my company only pays me (as an employee of my company) 1p per mile, the nice men in Hectorville will pay the other 39p per mile for me?

I don't think so!

[SteveV]

He means that you personally are employed by your company, so it doesn't reset for each contract because you are presumably still employed by your co. If you subsequently take a job where you are employed by a different company (ie go permie, or use someone else's co), then it resets....
I hope that makes sense...?

So your saying going from umberella to Ltd half-way through the year would reset the counter ??

[ruth11]

He means that you personally are employed by your company, so it doesn't reset for each contract because you are presumably still employed by your co. If you subsequently take a job where you are employed by a different company (ie go permie, or use someone else's co), then it resets....
I hope that makes sense...?

[NotAllThere]

No. It's as the ACCOUNTANT says.

[Danbro]

Danbro Accounting

That doesn't sound right, if it is personal allowance surely it is 10k per year for all jobs combined

Hi Steve,

As I understand it, the 10,000 does retart if you change employment but not if you have control of the companies, ie if you are a Director / shareholder and start a new company the 10k allowance wouldnt start again.

Thanks

Neil

[SteveV]

It also re-starts if you have changed your employment, although this will tend to only apply to people who start a new business part way through the year.
Alan

That doesn't sound right, if it is personal allowance surely it is 10k per year for all jobs combined

[IdleObserverNo1]

The Business Mileage Allowance for use of private cars for company business is set by the Inland Revenue. Currently it stands at a maximum of 40p and has been this figure for several years. The company itself can pay you less. But you can claim the difference from the Inland Revenue.
The Inland Revenue sets the rate for each Inland Revenue Tax year which runs from 6th april to 5th April.
As the rate has not changed for several years, at the moment it is irrelevant whether or not your company's business year coincides with the Inland Revenue's tax year.

[Nixon Williams]

It does re-start on 6th April each year.

It also re-starts if you have changed your employment, although this will tend to only apply to people who start a new business part way through the year. For the avoidance of doubt, it does not re-start with each new contract.

Alan