Tag Archives: Personal expenses

Mileage Payments – Allowable Expenses

Most people are aware that you can claim a mileage allowance when using your own car for business purposes.

For Business Owners

The approved mileage allowance for cars is 45p per mile for the first 10,000 miles and 25p per mile thereafter. But did you know that you can also claim an additional 5p per mile for each passenger travelling with you for business?

If you use the approved mileage allowance then there is no need to complete these details on the P11D at the end of the year.

For Employees

Also, the approved mileage allowance doesn’t just apply to those claiming for their own business but also applies to employees.

An example, if your employer only pays you 30p per mile for business, the approved amount is higher so you’re entitled to Mileage Allowance Relief on the difference.

For example: if you use your own car for 900 business miles and your employer pays you 30p per mile. The approved amount is £405 (900 x 45p). The allowance you get from your employer is £270 (900 x 30p). Your Mileage Allowance Relief is £135 (£405 less £270).

The Mileage Allowance Relief will reduce the amount of income you pay tax on, so your tax bill will reduce by £135 at 20% (if you’re a basic rate taxpayer) or at 40% (if you’re a higher rate taxpayer) and at 45% (if you’re an additional rate taxpayer)

You are only entitled to Mileage Allowance Relief if your employer pays you:

  • no mileage allowance
  • less than the approved amount. If your employer pays you more than the approved amount, you’ll have to pay tax on the extra.

The mileage allowance also applies to motorcycles and bicycles

For a motorcycle you can claim 24p per mile and there is no upper limit as with cars.
For a bicycle you can claim 20p per mile.

What records you must keep?

You need to keep records of dates, mileage and details of all work journeys. Your employer needs this information to make expenses payments to you. You also need them to get any Mileage Allowance Relief.

If you use different vehicles

If you use more than one vehicle of the same kind add all your business miles together in one calculation.

If you use vehicles of different kinds make separate calculations for each one.

If you would like some advice on what business and personal expenses are allowable, please get in touch.

5 simple rules to keep the tax inspector happy!

To put your mind at ease we’ve been taking a look at past inspections and the reasons behind them, and we’ve come up with five simple rules to keep you in the taxman’s good books!

Rule 1 – Record your Expenses and Mileage as they happen

Yes, it may appear a simple suggestion, but it’s a vital task that people often neglect. You don’t want to find yourself scratching your head, wondering what that £70 train ticket last January was for. It’s not just best-practice either – HMRC demand you keep expense receipts going back six years in case they come knocking.

Rule 2 – Review your contracts for IR35 liabilities

It can be a real headache to determine whether you fall foul of IR35 Legislation, especially when HMRC themselves can’t tell you with any real certainty. But as IR35 remains one of the main reasons tax inspections are launched, you need to make sure you’re on top of it.

Simply put, IR35 is used to determine whether you are “employed” by your client or providing “self-employed” contracting services through your limited company. However, the real confusion lies in how they determine this, and the legalese they use to describe said process. If unsure, always consult an expert.

Rule 3 – The proper use and recording of Dividends

Give HMRC half an inch to reclassify your dividend as a director’s loan and they’ll certainly try. This means that if you owe your company in excess of £5,000 it qualifies as a Benefit in Kind, and begins attracting additional tax and National Insurance liabilities.

To keep the inspectors off your back it’s advisable to only take a dividend if you have the profits available to do so. HMRC are vigilant towards the use of company funds for personal use, so try to keep everything simple and above board.

Rule 4 – Don’t pay Personal Expenses through your Company

When you set up your limited company you created it as a legal entity separate to yourself, you need to remember that your business is not a personal bank account for you to abuse.

There is some discretion with regards to personal expenditure that is collectively under £5,000, but it’s best to avoid bad habits where possible.

Rule 5 – Be on time and up to date!

Late tax payments or no payments at all will attract the tax inspectors like bees to honey!

Make sure to plan properly, know when your returns to HMRC and Companies House are due, and that you have allowed enough time to complete them.

Chase up all your debts and keep your records as accurate as possible. This means raising invoices, recording expenses and regular bank reconciliation. Stay on top of these and you’ll be golden should the taxman knock on your door.