Tax free mileage allowance for sub contractor

[smileymiles]

Hi

I am a sub contractor and my petrol spend last year was £3500 this added to repairs and various other motoring expenses was a large sum which I could not claim from the companies I work for. so I only received 22% of this money spent back, This was a large slice of money out of my earnings.

My question is can I claim tax free mileage allowance? as a sub contractor. I did 17800 miles last year, I understand that I cannot also claim motoring expenses. It is not clear on my self assesment form.

I also only work for one company.

Many thanks Shaun

[adi36]

Hi

Generally speaking you can either claim the business use % of actual car running costs or the approved Revenue mileage rates which include the wear and tear of the vehicle.

Regards

[smileymiles]

Hi
Thanks your your reply. Would these be against tax or would the mileage be tax free as it is with an employee.

Thanks Shaun

[adi36]

well if you claimed say 40p per mile for 1000 miles £400 would reduce your tax bill at whatever your marginal rate of tax is.

Regards

[smileymiles]

Hi Sorry to be a pain. so the hypothetical £400 would come of tax payable. The £400 would not be a taxable allowance added to my other expenses., wherby I would only feel the benefit of 22% of the £400. does that make sense Cheers Shaun

[Daniya]

If an employee down load the form P87 from HMRC web site regarding the above rates, if you are self-employed then claim 40P for the first 10000 miles and 25p thereafter for any more miles,pls note as mentioned above you will not be able to claim any other MV EXP.if you claim mileage rate.

[CDavey9501@aol.com]

I presume you are self-employed. The milage claim (just like any expense) will reduce your taxable profits. You pay tax on your profits.

eg. 17800 business milage = £5920 motor expense claim in the accounts. How does this compare with the motor & capital allowances claimed? Once you choose one method then you normally have to stick with it until you change motor vehicles.

If you are a higher rate taxpayer your tax/class 4NIC liability will fall by £2,472.20 (i.e. 40% tax + 1%NIC).

If lower rate tax payer then it will probably fall by £1,776 (i.e. 22% tax + 8%NIC).

[King_Maker]

I suspect that you were hoping that there is some mechanism for you to obtain the full 40p allowance - other than invoicing your clients (which you did not)?

Unfortunately, (just like an employee whose employer does not pay him/her the 40p/25p HMRC mileage rates), you cannot do so. The best you can achieve is obtaining tax relief at your highest rate on the relevant amount. Or claim all the motoring expenses, plus finance interest (which can also be claimed using the mileage rates), plus Capital Allowances. A restriction is needed for any private use.

[smileymiles]

Hi

Thanks for that. I think what has put this idea in my head. When I worked for an employer and did any business miles in my own car, I was paid at the end of the month a mileage allowance, which was tax free, this was shown in a non taxable box on my pay slip. I cant claim back my petrol from my clients, so I thought this might be a better way to claim back the motor costs.