insurance and tax...

[Upatdawn]

A family member starts work as a lettings agent soon, he has been "granted" an annual car allowance of £750 but they say its taxable (its his own car), is that right?

also, ive said, if he has to (say) travel to a viewing doe a letting he might need business insurance, althought it might be classed as travelling to work?

any ideas?

[RizzoTheRat]

Dunno about the tax but if he's travelling during times he's being paid then he's going to need the business insurance, costs next to nothing though and I think was free on my current policy (Admiral)

[SmithyAG]

He will need business insurance, as commuting to work only includes one place of work.

As said above, on my policy the difference between with and without business use was negligible.

[Red Devil]

Upatdawn said:

A family member starts work as a lettings agent soon, he has been "granted" an annual car allowance of £750 but they say its taxable (its his own car), is that right?

Yes. A car allowance will be treated as additional salary (in lieu of a company vehicle) and subject to tax and national insurance deductions under PAYE (tax @40% if the higher rate applies to his/her earnings). If paid AMAP without an allowance (see here - page 57 and here) for specific business journeys they do not attract any deductions.

£750 per annum (is it really that low?) is incredibly stingy imo. Will he/she get any mileage payments as well? You might find these links helpful.

http://www.pistonheads.com/gassing/topic.asp?t=133...
http://www.pistonheads.com/gassing/topic.asp?t=132...
http://www.pistonheads.com/gassing/topic.asp?t=114...
http://www.pistonheads.com/gassing/topic.asp?t=110...

Upatdawn said:

also, ive said, if he has to (say) travel to a viewing doe a letting he might need business insurance, althought it might be classed as travelling to work?

any ideas?

Previous poster is correct. Class 1 cover definitely required.

A lettings agent who is not required to conduct viewings on a regular basis - that would be a first!

[New POD]

I'm assuming that the HMRC rate of 45p a mile will be reduced by the employer because of the 750 quid ?

Given that the £750 will be worth £10 a week after tax, or £2 a day, if the reduction in mileage rate is more than about 3p a mile, I'd tell them not to bother with the extra pay thanks, just pay the HMRC rate.

[Jon1967x]

Yes it's taxable in the same way if they gave him a car there would be a benefit in kind charge

There is good news as touched upon above

He should keep a record of all business mileage and can claim off the tax man, less any payment his employer gives him. The exact figures are on the hmrc web site but it's something like 40p a mile for the first 10k and 25p after that. If his employer gives him 15p a mile he can claim. 25p then 10p. This is tax allowance and what he will receive depends on his highest rate of tax

I have the option of a car or cash and I take the cash, use my car and have business class insurance - makes very little difference to the premium. I also do a fax return and net about 1k a year in tax based on the mileage I do as above

[LoonR1]

No idea on the tax situation, other than I'd expect it to be taxable.

He / she needs Class 1 business inurance. I get it every year and have since I was 17. So far it has cost me £0 in additional premium.

[Jon1967x]

New POD said:

I'm assuming that the HMRC rate of 45p a mile will be reduced by the employer because of the 750 quid ?

Given that the £750 will be worth £10 a week after tax, or £2 a day, if the reduction in mileage rate is more than about 3p a mile, I'd tell them not to bother with the extra pay thanks, just pay the HMRC rate.

If the 750 was in lieu of fuel then it gets more complicated and I believe is tax free so long as the they do sufficient miles at the 45p/25p over 10k exceeds it.

[Red Devil]

Jon1967x said:

New POD said:

I'm assuming that the HMRC rate of 45p a mile will be reduced by the employer because of the 750 quid ?

Given that the £750 will be worth £10 a week after tax, or £2 a day, if the reduction in mileage rate is more than about 3p a mile, I'd tell them not to bother with the extra pay thanks, just pay the HMRC rate.

If the 750 was in lieu of fuel then it gets more complicated and I believe is tax free so long as the they do sufficient miles at the 45p/25p over 10k exceeds it.

The OP has yet to come back and confirm whether any mileage payment is being made so that assumption is currently moot.

In respect of the lump sum, this will only be tax free if the employer can convince a HMRC Inspector to allow it. Each case is looked at on its merits. There is no direct connection with the mileage rates. Any such payments must be declared on a P11D - http://www.hmrc.gov.uk/helpsheets/490.pdf
See page 51.

[Jon1967x]

Red Devil said:

The OP has yet to come back and confirm whether any mileage payment is being made so that assumption is currently moot.

In respect of the lump sum, this will only be tax free if the employer can convince a HMRC Inspector to allow it. Each case is looked at on its merits. There is no direct connection with the mileage rates. Any such payments must be declared on a P11D - http://www.hmrc.gov.uk/helpsheets/490.pdf
See page 51.

I agree - I think my post was ambiguous. For it to be 'tax free' it would need to be covered by mileage driven but it would be also be unusual for an employer to make a lump sum to cover this and wasn't meant literally. Also as I understand it and irrespective of whether his employer pays him mileage he can still claim from hmrc for mileage incurred over and above travel to a normal place of work (taking into account 24 month rule and all that although that is unlikely to apply here ).

[Osito]

I think a lot of this may depend on how the employer is dealing with the car allowance. I was given a "car allowance" some time ago, but, in practice, my employer simply added that amount to my salary and for tax purposes it was treated as if it were part of my salary. If I drove my car on company business, I reclaimed the mileage at the HMRC rate at the time.

As others have said, if this guy's car will be driven for business purposes, then that is something which will need to be discussed with his insurer, as I imagine his present insurance won't cover him for that.

[Red Devil]

Osito said:

I think a lot of this may depend on how the employer is dealing with the car allowance. I was given a "car allowance" some time ago, but, in practice, my employer simply added that amount to my salary and for tax purposes it was treated as if it were part of my salary. If I drove my car on company business, I reclaimed the mileage at the HMRC rate at the time.

No, it doesn't. HMRC say it is mandatory that lump sum allowances are to be accounted for via PAYE (i.e. through the payroll) - see the link I posted earlier. Only if a tax free dispensation has been agreed can it be otherwise. In that case it is quite possible it will be paid via an expense claim as some payroll software programmes make it difficult to deal with non-taxable items.

[Osito]

Red Devil said:

Osito said:

I think a lot of this may depend on how the employer is dealing with the car allowance. I was given a "car allowance" some time ago, but, in practice, my employer simply added that amount to my salary and for tax purposes it was treated as if it were part of my salary. If I drove my car on company business, I reclaimed the mileage at the HMRC rate at the time.

No, it doesn't. HMRC say it is mandatory that lump sum allowances are to be accounted for via PAYE (i.e. through the payroll) - see the link I posted earlier. Only if a tax free dispensation has been agreed can it be otherwise. In that case it is quite possible it will be paid via an expense claim as some payroll software programmes make it difficult to deal with non-taxable items.

You post is pure PH gold. Contrarian purely for its own sake.

[Upatdawn]

phew.....lol

anyway, it seems they add it to his salary and he pays the tax...

£750 less 20% tax wont take him very far