Business Mileage and Car allowance

[kebab1]

My employer pays two different business mileage rates depending on whether the employee is paid a car allowance.
45p or 36p

Some posts I found from 2020 state this is common, but I am unsure if this information is still current.

The gov website doesn't mention reduced rates for car allowance drivers only drivers of company cars.
For reference, the car allowance is paid separately from salaries and taxed accordingly.

gov.uk

Would I be right to challenge this with my employer?

I also note that carrying passengers qualifies for an increase of 5p / passenger/mile.
Is this something that should also be included by default or is this optional?

[RayDonovan]

Usually (but not always), you'll get car allowance and the HMRC advisory fuel rate (which varies between 13p and 24p on Petrol depending on engine size)

The advisory rate should cover your fuel costs and the allowance is to run the car.

Some work places will pay car allowance and the upper limit (45p for the first 10k business miles) but that's becoming increasingly rare.

36p AND and allowance is very good.

I get 7p/mile (electric), 15p a mile reclaimed from HMRC (tax rate on the difference between 7p and 45p) and my allowance. Costs me around 2p/mile to run the car so I get back 22p.

Usually, 45p is for people using their car for work who don't receive an allowance.

[Countdown]

kebab1 said:

My employer pays two different business mileage rates depending on whether the employee is paid a car allowance.
45p or 36p

Some posts I found from 2020 state this is common, but I am unsure if this information is still current.

The gov website doesn't mention reduced rates for car allowance drivers only drivers of company cars.
For reference, the car allowance is paid separately from salaries and taxed accordingly.

gov.uk

Would I be right to challenge this with my employer?

That process is fairly normal / standard. the 45ppm rate includes an elenent for insurance/servicing/depreciation. If you're getting a car allowance then you get a reduced ppm rate to reflect this.

kebab1 said:

I also note that carrying passengers qualifies for an increase of 5p / passenger/mile.
Is this something that should also be included by default or is this optional?

Why would you get the 5ppm if you're NOT carrying a passenger?

[meb90]

As I understand it, if the car is owned by you (car allowance or not) you can claim the 45p rate. But if your employer pays you less, you can claim back the difference though your account on HMRC.

[kebab1]

RayDonovan said:

36p AND and allowance is very good.

I will probably keep quiet then!

Countdown said:

Why would you get the 5ppm if you're NOT carrying a passenger?

I mean specifically if you are carrying another employee.
I meant to say, is the employer obliged to pay 5ppm extra if carrying a passenger, or is it optional?

meb90 said:

As I understand it, if the car is owned by you (car allowance or not) you can claim the 45p rate. But if your employer pays you less, you can claim back the difference through your account on HMRC.

Thanks - I'm not sure if signing up for self-assessment is worth it for the difference, but I will check

[PorkInsider]

kebab1 said:

My employer pays two different business mileage rates depending on whether the employee is paid a car allowance.
45p or 36p

Some posts I found from 2020 state this is common, but I am unsure if this information is still current.

The gov website doesn't mention reduced rates for car allowance drivers only drivers of company cars.
For reference, the car allowance is paid separately from salaries and taxed accordingly.

gov.uk

Would I be right to challenge this with my employer?

I also note that carrying passengers qualifies for an increase of 5p / passenger/mile.
Is this something that should also be included by default or is this optional?

There is no reduced rate of tax relief for those receiving a car allowance.

Think about it in terms of taxable income and BIK. If you receive a £10k/pa car allowance it's just an additional £10k of salary as far as income tax and NI. It makes no difference to whether you can receive tax relief on 45ppm or not.

If your employer gives you a car allowance, which you're taxed on, and then £0.20 per mile driven, you can claim tax relief on the other £0.25 per mile that they're not paying you.

People will come up with all sorts of complexity around HMRC rates per mile, etc., but those other rates are for company car users and are irrelevant in this case.

[Cwomble]

meb90 said:

As I understand it, if the car is owned by you (car allowance or not) you can claim the 45p rate. But if your employer pays you less, you can claim back the difference though your account on HMRC.

Not quite true.
You can’t claim the difference but you can claim the tax on the difference

Do you do more than 10,000 miles pa?

Edited by Cwomble on Friday 15th November 21:40

[Sheepshanks]

kebab1 said:

I meant to say, is the employer obliged to pay 5ppm extra if carrying a passenger, or is it optional?

It's optional. If they don't pay it you can add it to your tax rebate claim, so you'd get 20% or 40% back, depending on your tax rate.

[meb90]

Cwomble said:

Not quite true.
You can’t claim the difference but you can claim the tax on the difference

Do you do more than 10,000 miles pa?

Edited by Cwomble on Friday 15th November 21:40

Yeah, fair enough. That's probably a better way of putting it.

I don't, no. I actually have a company car so not in this position, but have been looking into it with a colleague (as I will be in the same position in the future).

[MustangGT]

RayDonovan said:

Usually (but not always), you'll get car allowance and the HMRC advisory fuel rate (which varies between 13p and 24p on Petrol depending on engine size)

The advisory rate should cover your fuel costs and the allowance is to run the car.

Some work places will pay car allowance and the upper limit (45p for the first 10k business miles) but that's becoming increasingly rare.

36p AND and allowance is very good.

I get 7p/mile (electric), 15p a mile reclaimed from HMRC (tax rate on the difference between 7p and 45p) and my allowance. Costs me around 2p/mile to run the car so I get back 22p.

Usually, 45p is for people using their car for work who don't receive an allowance.

I am going to disagree here.

The government advisory rate is solely for company cars, for the company to either pay for business miles or to claim pay back for private miles if fuel is supplied. That is it.

The 45ppm is for all personally provided cars.

The company may choose to pay a lower rate if you have an allowance, the difference between what they pay and the 45p/25p (over 10k miles) is always claimable against HMRC, or refundable if paid more than the HMRC figures.

Does the company pay a higher allowance if paying less per mile? No idea, it will never be disclosed.

For a 20% tax payer doing 5,000 business miles being refunded 20ppm the tax reclaimable would be 5000 x 25p = £1,250 x 20% = £250, £500 for a 40% tax payer. Not to be ignored!