CASH FOR CARS
FIXED
PROFIT CAR SCHEMES
Under the current tax rules
an employer can pay an employee a mileage allowance
for the business use on an employees private car.
This allowance is not subject to NIC or Income
Tax and is totally allowable against profits for
tax purposes.
The Government authorised mileage
rates from 6th April 2002 are:
40 pence per mile up to 10,000
miles
25 pence per mile thereafter
| Using the previous example,
the employer could pay the employee: |
| Income |
£5,087 |
| Plus tax savings (30%) |
£2,180 |
| |
£7,267 |
| Assuming 25,000 m.p.a. Business
mileage, the employer could reimburse the
employee: |
| i.e. 10,000 miles @ 40p per
mile |
£4,000 |
| 15,000 miles @ 25p per mile
|
£3,750 |
| |
£7,750 |
The employer would be better off
and the employee would receive £7,750 plus
have a benefit in kind tax saving.
The employee's question would be
"is this enough to at least break even?"
For more information on issues
and policies relating to company vehicles and
cash for cars scheme. View the web site below:
www.inlandrevenue.gov.uk/rates/travel.htm
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