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Sam
Sam, Accountant
Category: Tax
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I AM SELF EMPLOYED, I USE MY OWN PRIVATE VEHICLE TO CARRY OUT

Resolved Question:

I AM SELF EMPLOYED, I USE MY OWN PRIVATE VEHICLE TO CARRY OUT MY WORK, I RECORD THE MILES USED DAILY ACCURATELY AND DEDUCT ANY PRIVATE MILES. THE WORK MILES I THEN HAND OVER TO MY BOOKKEEPER/ACCOUNTANT. I DO IN THE REGION OF 10K PER YEAR. AS IT IS THE END OF THE TAX YEAR SHE IS CURRENTLY DOING MY BOOKS. THE APPROX AMOUNT OF TAX/NI'S I HAVE TO PAY IS MUCH HIGHER THAN WHAT I EXPECTED. I ASKED HER IF SHE HAS TAKEN THE MILEAGE ALLOWANCE INTO CONSIDERATION AND SHE REPLIED SHE HAS BUT AS MY TAX RATE IS 20% THIS IS DEDUCTED OF THE 45P ALLOWANCE. HER REPLY BY EMAIL WAS WORDED AS FOLLOWS: You Claim Business Mileage at a rate of 45p per mile. So every mile at AT 45P reduces your tax by 9p. HAVING LOOKED ON THE HMRC WEBSITE IT SAYS THAT THE MILEAGE ALLOWANCE IS A TAX FREE ALLOWANCE. IS SHE RIGHT IN WHAT SHE IS SAYING. THANKYOU STEVE
Submitted: 3 years ago.
Category: Tax
Expert:  Sam replied 3 years ago.
Hi Steve

Thanks for your question

If you did 10,000 business miles, then all of this would be at the rate of 45p a mile - so would allow you a deduction from your gross income of £4500

Then this £4500 is deducted along with all other expenses - laving a net income position, from which tax and national Insurance are considered.

But 20% is NOT deducted from the 45p - but in terms of how it benefits you - the £4500 in essence allows you to pay £900 less tax and £405 less Class 4 National Insurance - which amounts to 13p off per mile. (but tax alone benefits you from paying 9p less per mile)

Thanks

Sam




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Expert:  Sam replied 3 years ago.
Hi Steve
I hope you were able to make sense of the tax position, let me know if I can of any further help

Thanks

Sam