Business Mileage Rates - Help me understand

[DickP]

Hi,

I am changing jobs and one that is on offer is providing a car allowance and found out that their mileage allowance is only 13ppm.

My current and previous role with car allowance had a business mileage rate of 45ppm, with the current being as per HRMC limits (10,000 miles then the lower rate afterwards) and the one before up to 4,000 miles.

Is it particularly common to get such a low ppm rate if receiving a car allowance?

I understand that I could claim the tax difference back, but not sure how this works in practice. For ease with numbers, is anyone able to explain what tax I could claim back for if I were to be claiming 13ppm for 10,000 miles?

Thanks!

[Buster73]

32p per mile.

https://www.gov.uk/government/publications/rates-a...

[alistair1234]

Very common, my last place was car allowance and 11p per mile. It’s the government standard amount on the Gov website.

You can’t claim back the difference, you can claim the tax back on the difference between what they pay you and 45p. So 20/40% of 32p = 6.4/12.8p extra

I think previously you were lucky to get both. If you think about it this way, 45p a mile is normally given to cover the cost of everything. If they give you a car allowance, they then only really need to cover the cost of the fuel.

[anonymous-user]

From my experience of claiming business mileage in a private car, I think you could claim the tax back on the difference between the rate paid and that allowed i.e. 20% of 32p per mile i.e. 6.4p per mile (assuming max is 45p per mile).

I don't think you can claim at the higher tax rates, well I wasn't able to.

[DickP]

Buster73 said:

32p per mile.

https://www.gov.uk/government/publications/rates-a...

Sorry, but I don't see where it says 32ppm?

alistair1234 said:

Very common, my last place was car allowance and 11p per mile. It’s the government standard amount on the Gov website.

You can’t claim back the difference, you can claim the tax back on the difference between what they pay you and 45p. So 20/40% of 32p = 6.4/12.8p extra

I think previously you were lucky to get both. If you think about it this way, 45p a mile is normally given to cover the cost of everything. If they give you a car allowance, they then only really need to cover the cost of the fuel.

Okay, I didn't realise that the 45ppm was considered quite generous.

So to give some further numbers, the car allowance I have had has ranged between £4,200 to £4,500 over the past two jobs. I estimated that these sums aren't particularly great if doing say 10,000 business miles per annum and that the mileage ppm would offset the wear, tear, depreciation and maintenance cost as well as fuel.

As a 20% tax payer, over 10,000 miles I would be able to claim £640 back on tax?

Thanks for the responses too!

[mfmman]

gottans said:

From my experience of claiming business mileage in a private car, I think you could claim the tax back on the difference between the rate paid and that allowed i.e. 20% of 32p per mile i.e. 6.4p per mile (assuming max is 45p per mile).

I don't think you can claim at the higher tax rates, well I wasn't able to.

You can if you pay enough tax at the higher rates to offset against

[anonymous-user]

45ppm is the tax free allowance from HMRC, companies can pay more but you will have to pay tax on it. The 45ppm is up to 10k miles, beyond 10k miles the tax free limit is 25ppm.

[Scrump]

32ppm being mentioned above is the difference between the HMRC Max of 45ppm and the OP employer’s rate of 13ppm.

For the first 10k miles OP could claim back 20% or 40% tax on the 32ppm.

After 10k miles they could claim back the tax on 12ppm (the difference between the HMRC value of 25ppm and the employer rate of 13ppm)

Whether the OP claims 20% or 40 % depends on whether they are a higher rate tax payer (and pay sufficient at the higher rate to be able to claim that much back).


My employer pays a fairly low company car allowance but pays the full HMRC rates. A previous employer paid a much more generous car allowance but paid low mileage rates.

[Dimebars]

DickP said:

Buster73 said:

32p per mile.

https://www.gov.uk/government/publications/rates-a...

Sorry, but I don't see where it says 32ppm?

It doesn't

It says 45ppm

45ppm - 13ppm = 32ppm * 20/40% is what you can claim back, depending on whether you're a higher rate taxpayer or not

Also you should note that if your claim for any one tax year totals more than £2,500 then you will be forced into doing a self-assessment forevermore if you don't do one already

[Gooose]

Our workplace has 44ppm if you are using your own car or 10ppm if you receive a car allowance per year, generally £5,000 a year

[Countdown]

DickP said:

Hi,

I am changing jobs and one that is on offer is providing a car allowance and found out that their mileage allowance is only 13ppm.

My current and previous role with car allowance had a business mileage rate of 45ppm, with the current being as per HRMC limits (10,000 miles then the lower rate afterwards) and the one before up to 4,000 miles.

Is it particularly common to get such a low ppm rate if receiving a car allowance?

I understand that I could claim the tax difference back, but not sure how this works in practice. For ease with numbers, is anyone able to explain what tax I could claim back for if I were to be claiming 13ppm for 10,000 miles?

Thanks!

That's normal. If you were getting only 45ppm that is meant to cover BOTH the wear and tear on your car AND the fuel cost. If you are getting a car allowance that is meant to cover the wear and tear element. and then you get the 13ppm to cover the petrol cost

You can't (or you shouldnt) get a car allowance PLUS the 45ppm rate. It's for the same reason that people who have company cars don't get 45ppm for business mileage.

ETA you CAN do but you'll get taxed on them.

[Scrump]

Countdown said:

That's normal. If you were getting only 45ppm that is meant to cover BOTH the wear and tear on your car AND the fuel cost. If you are getting a car allowance that is meant to cover the wear and tear element. and then you get the 13ppm to cover the petrol cost

You can't (or you shouldnt) get a car allowance PLUS the 45ppm rate. It's for the same reason that people who have company cars don't get 45ppm for business mileage.

ETA you CAN do but you'll get taxed on them.

I am not sure I understand you.
It is ok with HMRC to have a car allowance (which is taxed) and then for employers to pay the full 45ppm (for up,to 10k miles) without being liable for any further tax.

As long as the car allowance is taxed then the normal tax free car mileage rates apply. (Not the company car rates).

[DickP]

Thank you all for your replies. It has helped!

Car allowance of £4,200 before tax plus the 13ppm say doesn't give a lot of leeway for running much though! It seems to rely on the car being 100% reliable for say four years (for a relatively new mid-size Astra, Focus etc).

Is it common they assume that one would already have a car anyway which is why the figure is as low as it is?

Or has it not kept up with the inflation in second hand car prices?

Thanks,

[mfmman]

If your employer were to give you a company car then the BIK you would pay would be about the same as the car allowance after tax & NI, you may chose to factor that in as well when considering your budget to buy & run your car

ETA, don't forget that it really depends on the whole package, don't just focus on the car/allowance. Years ago I took a role that included a 15% pay increase and some other plusses, but no option but to take a car from a poor choice list rather than opt out as I had done previously. I had to remind myself time and time again that the whole package was better, the job role was better and the employer was better to work for rather than get annoyed about how much a car I would never have even considered buying was costing me per year

Edited by mfmman on Tuesday 22 September 21:18

[DickP]

Hi all,

Thanks for the replies, quite useful!

Thanks,

[surveyor]

Our place are similarly harsh.

It works if you don't do loads of miles.

I do 35k and it does not work. Have a company vehicle instead, but one which falls within the commercial tax scheme.

[DickP]

Hi all,

Sorry to dig this up again, but did end up changing jobs but to a different firm which offers in short £5k allowance but only 11ppm, which corresponds with what some of you have stated as the norm.

In these circumstances if you end up doing over 10k business miles per annum, how do you approach this?

Surely you don't all end up driving a Daewoo Matiz (or equivalent) particularly if client facing?

Also Surveyor are you a BS or GP? What part of the world do you cover?

Thanks!

[surveyor]

DickP said:

Hi all,

Sorry to dig this up again, but did end up changing jobs but to a different firm which offers in short £5k allowance but only 11ppm, which corresponds with what some of you have stated as the norm.

In these circumstances if you end up doing over 10k business miles per annum, how do you approach this?

Surely you don't all end up driving a Daewoo Matiz (or equivalent) particularly if client facing?

Also Surveyor are you a BS or GP? What part of the world do you cover?

Thanks!

Im a misfit. A GP but sit in the Building Services department. Specialist telecoms firm.

My patch is U.K. in it’s entirety and Ireland, although I’ve not seen the latter since February, and may lose it in the future.

[mfmman]

DickP said:

Hi all,

Sorry to dig this up again, but did end up changing jobs but to a different firm which offers in short £5k allowance but only 11ppm, which corresponds with what some of you have stated as the norm.

In these circumstances if you end up doing over 10k business miles per annum, how do you approach this?

Surely you don't all end up driving a Daewoo Matiz (or equivalent) particularly if client facing?

Also Surveyor are you a BS or GP? What part of the world do you cover?

Thanks!

I opted out of the car scheme in August on to what I thought was going to be much the same deal as you, thought long and hard about options and decided on (and bought) a used BMW 330i. (3years old, 17,000 miles)

Reasoning was as follows

No point opting out and buying something that isn't very different to the cars on the list (just taking all the risk for no reward)

I'm not interested in running the cheapest car possible just to save a few quid (as above)

The ppm is basically going to pay for just the fuel regardless of what you get within reason (obviously not a huge 4x4 or something) so can be ignored

As long as your opt out car isn't going to be valueless inside three years due to mileage (I have done this in the past and factored my choices based on it being so) then you can expect it to retain a good lump of its value.

I always factor in how much BIK I would be paying if I had taken an option from the company car list (or a suitable sum if no car is available)

Mileage is a hard one to judge as travel is limited at present but I based it on an expected 25k pa, 15k of which was company use

I think I will have about £200 per month left after all fixed costs (purchase, insurance, manufacturer warranty VED etc) to pay for tyres servicing etc. I must add that I got a slight surprise in that my car allowance was actually 8k, not 5k but I only found this out after I had done my sums and bought a car. So the margin would have been lower but since I am driving a car that is nicer than my company car options and I could sell at any point and see some of its value returned (after an initial hit obviously) I was happy if it was going to cost me a few quid every month any way.

Edited by mfmman on Saturday 7th November 07:33

[DickP]

Hi,

Sorry I don't think I understand how 11ppm alone can cover the fuel for a typical family car. My diesel estate car at 70mph motorway cruise does around 45mpg, 50mpg on a good summer day. I have calculated at say current average 118.2 pence per litre, the car doing 45mpg gives a cost of 11.182‬ pence per mile.

However I understand the above does not allow for claiming the allowable mileage difference back in tax, which I think would give an additional 6.8‬ppm in tax relief. Therefore combined I could "get" 17.8ppm? Presumably I would only see the tax relief via a reduction in the following year's PAYE tax?

surveyor said:

Im a misfit. A GP but sit in the Building Services department. Specialist telecoms firm.

My patch is U.K. in it’s entirety and Ireland, although I’ve not seen the latter since February, and may lose it in the future.

Hi Surveyor - radio masts?

I'm BS.

Thanks,