This article was written in response to a reader’s question. If you have a financial or work/career question that has left you scratching your head ask our panel of experts who will aim to shine some light on the matter.
I have recently changed my job and, as a result, am now a higher-rate taxpayer. My company pays the full mileage rate allowed by HM Revenue & Customs (HMRC) of 45p per mile for work-related travel.
I have been told that, as a higher-rate taxpayer, I could be entitled to make a claim to recover some of the tax paid. Upon investigation, it appears rebates only apply if you are paid less than the HMRC maximum. Is this correct?
Yes. HMRC mileage expenses are relevant if you use your own car for work and pay for all costs, including fuel. Journeys to and from your place of work are excluded, so while driving to visit a customer or deliver an item qualifies, driving to the office doesn't.
Depending on whether or not your employer pays you expenses for this and, if so, how much, you may find yourself either owing or being able to reclaim some tax.
The HMRC rates for
a car are currently a miserly 45p per mile for the first 10,000 miles in a tax year, followed by 25p per mile thereafter. If your employer pays you exactly these amounts, it's free of both income tax and national insurance.
If it pays you more than this, the excess is taxable as income. If you're paid less, you can claim additional income tax relief for the balance.
HMRC has a useful help sheet on its website at hmrc.gov.uk/mileage/employee-factsheet.pdf .
At a glance: company cars
Being handed the keys to a flash company car and having your petrol paid for may seem like a great perk to your job, but don't forget you'll probably be taxed for it.
As a general rule of thumb, the more expensive the car and the more fuel it guzzles, the more tax you'll have to pay.
So, to keep your company car tax bill to a minimum, choose a smaller, cheaper or greener model. And don't forget that you pay more tax on diesel cars than petrol vehicles because they give out more toxic emissions.
For more information about the costs involved in running a company car, including a useful tax calculator, visit HM Revenue & Customs' website at hmrc.gov.uk/calcs/cars.htm .