Reply to: Do you actually make anything on mileage?

[Archangel]

Right but they are the 2 extremes.

My point is that to drive an average car that you can rely on (say £4k depreciation over 3yrs/50k miles) you are out of pocket.

That dirty smelly pick-up truck is looking more and more viable (while the loophole's open!

I don't understand your logic.

I have a car, I drive to work at client site in the car.

I can either fund this out of taxed income, or out of the 40p a mile allowance, where does the "out of pocket" come into it? You will always be out of pocket, just with the allowance you are out of pocket less (16p a mile).

[rootsnall]

Yes but is it reliable enough to do 15k miles/year?

My current one has never had a problem and is doing 400-450 miles a week. Until they start getting over 100K on the clock I don't think they are any more unreliable than a brand new car these days. The downside is mine looks carp. You need your other half to have something half decent if you practice bangernomics and have some shame.

[Bluebird]

I agree with what you say but my point is that it's no money spinner. At the end of the day, you personally are better off the less miles you do.

In your figures some of the things you mention still apply if you run a car.

Given the option I guess the best thing is to use other public transport - then the full cost of travel comes out of the business before taxation, and there are no other attached costs such as servicing mot etc.

I drive a 2000 Peugeot 306, it does the job and is cheap to maintain.

[Hiram King Of Tyre]

Yes but is it reliable enough to do 15k miles/year?

[rootsnall]

Right but they are the 2 extremes.

My point is that to drive an average car that you can rely on (say £4k depreciation over 3yrs/50k miles) you are out of pocket.

That dirty smelly pick-up truck is looking more and more viable (while the loophole's open!

The Dim one has already put you onto the right model, the £600 quid Vectra. Just about good enough for getting to work and back but also perfect for leaving in B&B carparks, down the pub for a week or two, and for building work and dump runs.

[Hiram King Of Tyre]

Right but they are the 2 extremes.

My point is that to drive an average car that you can rely on (say £4k depreciation over 3yrs/50k miles) you are out of pocket.

That dirty smelly pick-up truck is looking more and more viable (while the loophole's open!

[DimPrawn]

I agree with what you say but my point is that it's no money spinner. At the end of the day, you personally are better off the less miles you do.

Yes. The only "winners" are those driving a £600 Vectra who does not service it, and where the depreciation is zero.

For those driving a brand new SL 55 AMG, you have lost before you even turn a wheel.

[Hiram King Of Tyre]

If you pay yourself milage you get 40p per mile.

If you don't - you still have to do the miles, but then you take that money as either dividend or salary - both of which are taxed.#

So I don't see how you could be worse off, unless of course you walked to work - the you wouldn't have to incur any motoring costs.

I guess the question is, does 40p per mile reimbuse you for your motoring costs to the extent that your travel to work is free ? The answer to that is no.

But then apart from MPs and British Rail staff - who does get to work free ?

I agree with what you say but my point is that it's no money spinner. At the end of the day, you personally are better off the less miles you do.

[Hiram King Of Tyre]

My point is this:

I really can’t see how it can cost in unless you’re driving an old banger and are lucky with breakdowns etc

Let’s take an average car. Assume the following 40 mpg and £1 per litre (to keep calcs simple) and 50,000 miles over 3 years

Fuel costs: £5687.50
Insurance: £1200.00
Servicing: £1200.00
Tyres etc: £300.00
Breakdown Ins: £300.00
Depreciation: £4000.00

TOTAL: £12,687.50


Allowance:

30,000 @ 40p: £12,000
20,000 @ 25p: £5,000
Total: £17,000

Tax saving compared with taking £17,000 as PAYE @ 40p: £6,800


TOTAL LOSS: £5887.50

I know that some of the tyres servicing, depreciation etc would be of personal benefit but only say 5-10%. At the end of the day though, I am still nearly £6k out of pocket (on a net basis). I agree that you may have to travel to allow your business to operate but at the end of the day you are only in pocket if you are an employee of the company who wouldn’t have the option of taking an extra £17k as salary

Am I missing something?

[Bluebird]

If you pay yourself milage you get 40p per mile.

If you don't - you still have to do the miles, but then you take that money as either dividend or salary - both of which are taxed.#

So I don't see how you could be worse off, unless of course you walked to work - the you wouldn't have to incur any motoring costs.

I guess the question is, does 40p per mile reimbuse you for your motoring costs to the extent that your travel to work is free ? The answer to that is no.

But then apart from MPs and British Rail staff - who does get to work free ?

[DimPrawn]

You're not subsidising the business, the business is making less money because of the travel costs, and has less to pay you. You could stay at home, but then the business wouldn't get anything. You travel to make money, and as long as you make more than it costs you, you're ahead.

It's disgraceful, that in order for me to live I have to spend money on food and pay for housing. Why should I personally support my company like this, just so it can make money? Well?

[VectraMan]

OK but the point I make is that the net effect is that you are subsidising your business because it's personally costing you more than the tax you are saving

You're not subsidising the business, the business is making less money because of the travel costs, and has less to pay you. You could stay at home, but then the business wouldn't get anything. You travel to make money, and as long as you make more than it costs you, you're ahead.

[Bagpuss]

OK but the point I make is that the net effect is that you are subsidising your business because it's personally costing you more than the tax you are saving

If you have a newish car and it's thirsty then yes. I have a banger to mop up the miles, it's cheap to repair and it isn't losing any significant value, so the mileage allowance is a net gain for me.

[Hiram King Of Tyre]

You won't make anything, you will save money compared with not having it. Unless you fiddle it that is.

OK but the point I make is that the net effect is that you are subsidising your business because it's personally costing you more than the tax you are saving

[rootsnall]

I'd like to see your figures. At 10p per mile, that would just about cover the fuel surely?

I'm doing about 400 miles a week, so 40 quid on petrol ( banger burns a bit more than that I think when being hammered ), so say 50 quid, maybe a few quid more. I claim 160 quid in mileage from the company ( not hit 10K yet, if I get renewed I'll be down to 100 quid a week back ). The car was given to me, its beyond depreciation, MOT + service was 120 quid I think, insurance 250ish I think, chuck in a tyre or two plus contingency, say annual non petrol running cost a grand, 20 quid a week.

Pre 10K miles = 160 - 50 - 20 = 90 quid up, down to 30 quid post 10K. The profit is the tax I'd pay on that.

I've got to replace the banger at some stage but I'm already eyeing up a family freebie hand me down or I could take the Mrs decent car off her. The figures then wouldn't work as that has a bit of depreciation left in it yet.

How's that ? Have I missed something, quite possible.