Business mileage expense rates?

[NewbieT]

I’m PAYE. I get a car allowance (which is is taxed). My employer uses the Advisory Fuel Rate of 4p per mile.

Last week I did 208 miles.
I can claim: £8.32 (@4ppm)
Cost: £15.26 in supercharging.
I get free electricity at work and so left the office ‘full’. I ‘filled-up’ when I arrived to be ready for the return journey. So cost is full-to full.

4p per mile doesn’t even cover cost. Thevon-the-road network providers KWh rates are mostly comparable & the M3 is pretty efficient. HMRC / Treasury need a rethink- currently this is a dis-incentive.

I’m planning to claim the £15.26 as a direct expense and not the 4p per mile (and asking for salary sacrifice).

 

[arg]

4p per mile doesn’t even cover cost. Thevon-the-road network providers KWh rates are mostly comparable & the M3 is pretty efficient. HMRC / Treasury need a rethink- currently this is a dis-incentive.

For once I find myself defending HMRC! It’s your employers who need to stop being plonkers here - HMRC’s view is that they should be paying 45p in this situation.

For a long time HMRC resisted requests for an advisory fuel rate for electricity because it’s not really needed. Eventually they gave in and published one.

If your colleagues with ICE get only 14p then you are in a similar boat not getting your marginal costs covered. With workplace charging its more reasonable to claim actual costs than mileage rate.

 

[Rooster6655]

I’m PAYE. I get a car allowance (which is is taxed). My employer uses the Advisory Fuel Rate of 4p per mile.

Last week I did 208 miles.
I can claim: £8.32 (@4ppm)
Cost: £15.26 in supercharging.
I get free electricity at work and so left the office ‘full’. I ‘filled-up’ when I arrived to be ready for the return journey. So cost is full-to full.

4p per mile doesn’t even cover cost. Thevon-the-road network providers KWh rates are mostly comparable & the M3 is pretty efficient. HMRC / Treasury need a rethink- currently this is a dis-incentive.

I’m planning to claim the £15.26 as a direct expense and not the 4p per mile (and asking for salary sacrifice).

Forgive my ignorance but I thought the 4p per mile would be if your employer was paying for the electric and this 4p would be in addition to the electric cost, I will have to look into this further.

 

[arg]

Last week I did 208 miles.
I can claim: £8.32 (@4ppm)
Cost: £15.26 in supercharging.

Oh and also:

Did 208 miles, worth 45p*208 = £93.60 (assuming you do less than 10K business miles/year).
Employer paid £8.32 directly, they claim that the other £85.60 is covered by the car allowance on which you've already paid tax.

Therefore on your tax return, it reduces your taxable pay by £85.60 and if you've already paid tax on it via PAYE you'll get a refund at your marginal rate - if 40%, then you'll get a refund of £34.24.

So actually you aren't out of pocket, though at the cost of some form filling (especially if you've managed to avoid filing a tax return up to now).

 

[NewbieT]

Interesting points. Going to have to check last year’s business mileage - currently trying to get off self-assessment but it may pay to do the admin!

 

[elecTED]

4p a mile for an EV is totally ridiculous. Doesn’t even cover for wear and tear.

Yeah, I’d refuse to use an EV and choose the next most convenient method of transportation, especially if it’s business use.

We get 36p a mile for ice cars and I don’t think our expense system is geared up yet for EVs. I could make a tidy profit on my current work project if I used my M3 as the claim could be up to 800 miles per week. The charging is also free at the client site. But hey, I prefer to save the miles on my M3 (as much as I’d like to drive it) and instead hire a car and enjoy a peaceful night or two at a hotel every week... and sample some nice food

 

[volts]

For those getting 4p/mile etc, you can claim a tax advantage of 45p - 4p per mile as a tax rebate against your tax. Obviously, you'll have to fill in a form to do this but you'll end up being paid for it.

So, if you do 10,000 miles your tax claim will be £4100. If you pay tax at 40% then this will save you £1640 from your tax bill.

 

[DrJFoster]

The 4p a mile is the max HMRC will pay for a company car, they're already paying all the other costs

Its not the maximum rate for private cars, that's 45p, however some companies, especially where there is a company car allowance which some take as pay, still only pay the HMRC rate on the basis they're paying you the money to fund the car already. In this situation you can claim the difference (41p per miles up to 10k miles or so) as additional tax code, and depending on your tax rate can be worth getting on for an additional 20p a mile as Volts says.

As an aside, technically its not an Advisory Fuel Rate as electricity is not a fuel in HMRC speak, its an Advisory Electric Rate or AER if you google it and can't find it.

 

[Ukmgranger]

The 4p a mile is the max HMRC will pay for a company car, they're already paying all the other costs

Its not the maximum rate for private cars, that's 45p, however some companies, especially where there is a company car allowance which some take as pay, still only pay the HMRC rate on the basis they're paying you the money to fund the car already. In this situation you can claim the difference (41p per miles up to 10k miles or so) as additional tax code, and depending on your tax rate can be worth getting on for an additional 20p a mile as Volts says.

As an aside, technically its not an Advisory Fuel Rate as electricity is not a fuel in HMRC speak, its an Advisory Electric Rate or AER if you google it and can't find it.

I've seen a few people quote that you can claim back up to 10k miles, but what happens after 10k miles? I'm driving about 20k (16k business) miles a year roughly, and the current stance of our HR is that the milage rate is 4ppm (also on car ownership scheme).

The only way that The model3 comes into an affordable price point is if I get about 20ppm or above.

 

[arg]

I've seen a few people quote that you can claim back up to 10k miles, but what happens after 10k miles?

45p/mile for the first 10K miles, then 25p/mile for all the miles after that. Business miles only, commuting miles are not eligible.

 

[Ukmgranger]

45p/mile for the first 10K miles, then 25p/mile for all the miles after that. Business miles only, commuting miles are not eligible.

Thanks for the response!

So just to get this straight in my head - please correct me if I'm wrong here:

• Lease a model3 (I'm currently on a car ownership scheme) and drive 16k business miles and 5k personal miles.
• Employer pays me 4ppm for the 16k miles (monthly basis) appx £50per month
• At the end of the year I fill in self assessment and claim 41ppm for 10k miles & 21ppm for 6k miles (deducting the employers 4ppm)
  • This equates to £6000 which becomes £2400 at 40% tax (making a monthly saving of around £200)

So when do you see the tax relief that is returned to you?

I'm guessing that I wont see this cash physically until well into a year of ownership, meaning that the first year of ownership is going to be very tough as the savings are in the future?

 

[arg]

So when do you see the tax relief that is returned to you?

Normally, shortly after you file your self-assessment tax return. Typically, they pay fairly promptly - for example, this year I filed mine on 27th May and received the refund I was owed on 3rd June.

In theory, you can file it immediately after the end of the tax year (ie. 6th April), but in practice you probably need some time before you have everything you need to fill in the return (P60 from your employer, P11D if applicable, bank statements - depends how complicated your financial life is).

For subsequent tax years, in theory they should adjust your tax code (based on an estimate of what will happen next year) so that your employer deducts less PAYE each month and you may then end up owing or owed a small amount at the end of the year. In theory also, if you suddenly start having this mileage you can claim, you can contact them during the year to get your coding changed so that you start paying less tax immediately. In practice, I find it hard to get them to reliably correct even gross errors in my coding....

 

[NewbieT]

Update: My employer has taken advice and has now moved from the 4ppm. Depending on the policy we end up setting it will either be the actual cost or 45p per mile.

(Reminder: private car with car allowance and free electricity at the office).