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You can find out about which benefits are taxable and how they are worked out by clicking on the link below How will I be taxed on employment benefits?
Following on from benefits we look at using your own car for business travel - you need to know what allowances you can claim and what amounts will be taxable. You will also need to know if NIC will be payable. In this section we explain the rules about mileage allowances and dispensations.
Using your own car for business
We also look at other travel expenses and related costs and see how they are treated for tax purposes.
Will I get tax relief on my business travel and can I claim any other costs?
We summarise some other job expenses you may be able to claim
Other allowable employment expenses
Tax relief on expenses for employed homeworkers
Homeworking and broadband expenses
Finally we take a look at payroll giving and explain briefly how it works.
Payroll giving
How will I be taxed on employment benefits?
How you are taxed on a benefit provided by your employer depends on whether you earn more than £8,500 per year or less than this amount. The rules differ for each category of employee.
Earnings of less than £8,500 per year
Earnings of more than £8,500 per year
Earnings of less than £8,500 per year
The benefits in kind rules apply to all employees except those who are in lower-paid employment where there are some exceptions.You are in lower paid employment if you earn less than £8,500 before tax, even if you only work for part of the tax year. In working out if you exceed the £8,500 limit, the value of any of benefits received must be included, so your actual salary may be beneath the threshold, but the value of benefits in kind could mean you still fail the lower-paid employee test. Generally, in working out the £8,500 threshold, benefits are added in at their actual cost to the employer.
Directors cannot normally count as lower-paid, however much they earn. However, a director earning less than £8,500 a year will count as lower-paid if certain rules apply.
If you are in lower paid employment then generally the taxable benefit is the amount of money you would make if you sold the benefit you have received.
For example if you are given a printer which cost £350 and you sell it second hand for £50, the taxable benefit is £50.
However some benefits cannot be sold on the open market e.g. the use of a company car or medical insurance and in these cases there is no taxable benefit.
There are certain circumstances where the taxable benefit is the same no matter what your earnings. These are where you receive:
More details about these benefits can be found by clicking on the relevant link.
Earnings of more than £8,500 per year
Use of company car
- If you have the use of a company car the benefit to you will be based on a percentage of the list price of the car and any accessories and will be dependant on the type of vehicle. This figure is then multiplied by a percentage based on the vehicle's carbon dioxide emissions. From 2008/09 the rules are changing and you can see the revised position here.
- HMRC have a calculator for working out car and fuel benefit at and you can see an example of how this works by clicking on the link.
Private fuel
- If you are provided with free fuel for a car with private use then use the calculator to work out your fuel benefit.
Using a company van - the current rules
You will only pay tax if you use the van for private journeys other than journeys between home and work.
If this applies to you - contact your tax office to make sure you have the correct benefit in your coding notice.
When is there no tax to pay?
- There is no tax to pay if you only make business journeys in connection with your job.
- There is also no tax charge when you use the van mainly for work and the only journeys you make in it are work journeys and travelling between home and work.
- The onus is on your employer to demonstrate to the Revenue that you have no tax to pay and to do this you may need to keep your own records of mileage, date and purpose of journey etc. This may be included in your employment contract or you may have to sign a separate agreement about van use.
When might there be tax to pay?
You will have to pay tax on any private journeys you make in the van. Any minor use - that is using the van for a private purpose maybe only once or twice a year is usually considered insignificant and you should not have to pay any tax.
Where you do have to pay tax on private use of the van the amounts of benefit that will be included in your PAYE coding notice are as follows:
2008/09
All vans
Amount included in your tax code £3,000
Tax at basic rate £600
The above figures are reduced in some situations - for example:
- If you do not have use of the van for the whole tax year;
- Where someone else also uses it for private travel;
- Where you pay towards any private use.
Where fuel is provided by your employer
If you get free or subsidised fuel for private use from your employer, you will have to pay extra tax:
2008/09
Amount included in your tax code £500
Tax at 20% basic rate £100
You can get more detailed information on this here.
Living accommodation
Vouchers
- A voucher is any document such as a ticket that you can exchange for goods or services.
- If the voucher is for cash or can easily be converted into cash such as stocks and shares - it will be treated as pay and taxed under PAYE.
- For any other non-cash vouchers - the benefit is the amount your employer paid for it.
- There is a nominal exemption of 15p per day on luncheon vouchers.
- There are a number of exempt non-cash vouchers and these include childcare vouchers or transport vouchers such as those to obtain a car parking space at or near the workplace.
Employers credit cards
- Your benefit will be the amount paid by your employer for any goods or services you buy on the credit card unless these are purely for business purposes.
Creche facilities
Canteen meals (free or subsidised)
- These are tax free if they are available for all employees.
Parking facilities
Private medical insurance
- The cost to the employer for the cover you receive.
Cheap loans
- Interest at the official rate less any interest you have paid. The rate is generally fairly close to that charged by banks and building societies.
- There is no charge if the interest is a qualifying loan - this is where the interest would qualify in full for tax relief such as where the interest is a business expense or a deduction from rental income.
- For non-qualifying loans there is no charge if the loan is for £5,000 or less.
- If the loan is subsequently written off - the benefit will be the amount written off
- An interest free loan to buy a season ticket for travel to work is tax free.
Home and mobile phones & internet access
- If an employer provides you with a mobile phone and he pays all the bills including line rental and for private calls - this is exempt from both tax and NIC.
- If the contract is with the employee but the employer agrees to pay or the costs are reimbursed by the employer - the employee is then liable to both tax and NIC less an amount for any business use.
- Where the employer pays your home telephone bills - you will be taxed on the payment unless the private use of the phone is insignificant. The amount of the benefit will be the total payment less any business calls but not any part of the line rental. You will be liable to NIC on the amount paid by the employer for both line rental and private calls.
- If the contract for your home phone is with your employer then the benefit to you is the line rental and calls less any business calls and any amount made good to your employer.
- If however there is a definite need for a telephone to be provided and the employer ensures that private calls are minimal - it is possible you will not be charged for either the line rental or calls where the private use is minimal compared with the overall cost.
- If your employer provides you with internet access (broadband) in your home purely for business or where private use is at a minimum then provided the package cost is not affected by private use - there will be no benefit to you.
Other assets
- There is generally no benefit on the use of computers, cycles and cycle safety equipment nor on the use of a commercial vehicle (more than 3.5 tonnes weight) including any fuel unless the main use of the vehicle is for private purposes.
- Otherwise the charge is 20% of the value of the asset at the time it was first given to you to use.
- If the asset is second hand when you start to use it then for computers, cycles and cars the benefit is the market value.
- For other second hand assets the benefit is the higher of the market value at the date you were given the asset and the original market value less any amounts that have already been taxed on the previous user or users.
- For computers the benefit is 20% of the value over £2,500.
Goods or services which are part of your employers normal business
- The benefit in these cases is just the extra cost to the employer of providing you with the benefit. So if you work for a footwear manufacturer and you get free shoes - the benefit is the cost of the materials and manufacturing costs of the shoes.
- If however you worked for a train company and you got free travel of their trains - there is no additional cost to the employer in providing the benefit so it is tax free.
Childcare
- Where an employer either alone or with other employers/local authorities provides a workplace nursery then there is no benefit. Where the provision is joint each employer needs to be responsible for a part of the management of the scheme.
- The exemption also applies where another employer's staff are allowed to use the workplace nursery when they are working at the premises of the nursery provider.
- The provision by employers of qualifying childcare of up to £50 per week is also exempt from tax and NIC. Over this amount tax and NIC are charged on the excess.
- You can contract for qualifying childcare with a local nursery or childminder or can be provided by childcare vouchers.
- However remember that if your employer provides you with cash to cover your childcare expenses - this is not exempt.
- The rules as to how the scheme operates are quite complex. To qualify the scheme must be registered or approved childcare and it must be made available to all employees. The child must be the employee's own child or a child for whom the employee has responsibility.
- In two articles on the LITRG website we pointed out that employees who get help with their childcare costs through tax credits should be very careful before taking childcare vouchers from their employers. They could be a lot worse off.
- You can access the articles by clicking on the links below:
Urgent health warning for Childcare Vouchers
Childcare Vouchers - Continued . Use the link to read our latest article on this topic – Childcare vouchers 'revisited'
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Some other non-taxable benefits
We have mentioned some non-taxable benefits above. Some others include:
- Free parking facilities at or near your workplace
- Sporting and other recreational facilities provided by your employer or another employer
- Cycles and cycle safety equipment provided to staff generally and used mainly for business journeys and travel between home and work
- Use of a computer and computer equipment where the benefit (20% of cost plus any normal running expenses) is less than £500 per year. Anything over this amount is chargeable. Any internet connection is not included in the exemption.
- Long service awards for those with 20 or more years service. No award must have been made in the previous 10 years. The value of the award cannot be more than £50 for each year of service.
- Annual staff dinners provided the cost to the employer per person is not more than £150 a year (including VAT). This is worked out so that if your employer had a dinner every quarter at a cost per head of £55 - the exemption would cover the first two meals and the remaining £110 would be a benefit.
- Welfare and redundancy counselling for employees.
- Air miles or other points to obtain items - where these are obtained by employees in the same manner as any other member of the public even though they relate to the business. This does not include any employer incentive schemes.
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Using your own car for business
Using your own car - what qualifies as business travel?
Do I have to pay tax and NIC on my business travel?
What are the approved mileage allowance payment (AMAP) rates?
What if I am paid more than or less than the approved rate?
What if I take someone with me when on business?
What records should I keep?
How do I work out tax on motoring expenses?
How does my employer work out the NIC due on my motor expenses?
Will I have to pay tax and NIC if my employer pays for my business travel?
What records should I keep?
What is a dispensation?
Using your own car - what qualifies as business travel?
- Business travel includes journeys you have to make to carry out your work. These include trips such as travel from your office or place of work to visit your customer using your own car, motorbike, bicycle or your van.
- Business journeys are also those you make to or from a from a place where you have to be to do your job - for example if you travel from home to visit a client or customer - unless the journey is practically the same as the journey from your home to your place of work because the customer lives near your office.
- You cannot include your daily journey to work as business travel.
- You cannot include any private travel where the purpose of the journey is not for business.
- If your employer pays you for normal commuting - this is like having an additional salary paid to you and your employer will need to deduct tax and NIC from the amount paid to you.
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Do I have to pay tax and NIC on my business travel?
Many employees will be paid an allowance for using their own vehicle for business travel. Usually they will be paid so much per mile.
From 6 April 2002, there was a change to the system for working out whether you will have to pay tax and NIC on any payments made to you by your employer for using your own car etc for business journeys.
You can receive up to a maximum amount per mile without having to pay any tax. This is the Approved Mileage Allowance Payment (AMAP). This allowance is also used to see if you will need to pay tax and NIC on your expenses.
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What are the approved mileage allowance payment (AMAP) rates?
- From 6 April 2002 the approved mileage rates are as per the table below.
- If you have more than one job and your employers are not connected with each other i.e. the same people do not control each business, you can have a 10,000 mile limit for each job you hold.
- If the employers are associated - you have only one 10,000 mile limit to be divided between all affected jobs.
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First 10,000 business miles in the year |
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Each mile over 10,000 miles in the tax year |
| Cars & vans |
40p |
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25p |
| Motorbikes |
24p |
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24p |
| Bicycles |
20p |
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20p |
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What if I am paid more than or less than the approved rate?
- If you are paid more than the AMAP rate you will have to pay tax on the excess via your coding notice or your tax return.
- Your employer will need to work out whether you have to pay any extra NIC.
- If you are paid less than the AMAP rate you can get tax relief against your earnings for the difference.
- This relief is called Mileage Allowance Relief or MAR. To make a claim you will need to keep a record of your business miles and the mileage allowance payments made to you by your employer.
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What if I take someone with me when on business?
- If your employer pays you for taking a passenger, anything over an allowance of 5p per mile will be taxable and NIC-able. The passenger must also be an employee and the journey must be for business.
- Unlike AMAP - if you are paid less than 5p per mile to carry a passenger you cannot claim any relief on the difference.
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What records should I keep?
- Keep a log of your total business mileage during the year and what allowances your employer paid to you.
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How do I work out tax on motoring expenses?
You need to:
- Work out your business mileage for the tax year.
- Multiply your business miles by the AMAP rate to give you the total tax free payment.
- Add up the allowances you got in the tax year from your employer.
- If you had excess allowances from your employer you will have to pay tax on the extra or if your allowance was less than the total tax free payment you will have MAR Have a look again at this in What if I am paid more or less than the approved rate.
You can see to work out your own tax in the examples Ravi & Jock.
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How does my employer work out the NIC due on my motor expenses?
As with working out your tax on motor expenses How do I work out tax on motor expenses?,
your employer will look at steps 1 and 2 to see if you have made a profit.
If the allowances paid to you by your employer are more than your business mileage at the AMAP rate, you will pay NIC on the difference.
You can see how to work out your own NIC in the example Janice
Will I have to pay tax and NIC if my employer pays for my business travel?
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What records should I keep?
- You should keep a log of business travel to include dates, destination and how many business miles you travelled.
- Keep all receipts as proof of payments you have made including credit card statements. If you do not get a receipt make a note of the payee, what you spent and the date.
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What is a dispensation?
- When the expenses that your employer pays you are fully covered by your tax relief, your employer can ask their tax office to issue a 'dispensation'.
- If your employer has a dispensation you will get tax relief automatically. Your tax code will not show the expense payments and you should not include them on your tax return if you get one.
- Dispensations do not apply to car mileage expenses for your own car.
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Will I get tax relief on my business travel and can I claim any other costs?
Travelling expenses
- You can deduct your travelling expenses where you incur them in carrying out your employment or travelling to or from a place where you carry out your job provided the journey is not ordinary commuting between home and your normal permanent workplace, or is private travel.
- You can also include any business travel from home where it is more convenient in your type of job to work from home but not if your home becomes your workplace because of the nature of the work.
- If you are a site based employee with no permanent workplace (any job at a particular site is not expected to last more than 24 months otherwise the site becomes a permanent workplace) you can claim the cost of travelling to and from home.
- This rule does not apply if your job is only temporary and will last for less than 24 months and all or most of your work is based on the same site (compared to someone in a permanent job whose work on a particular site will be for less than 24 months).
- Journeys that are partly business and partly private will be allowed if mainly for business.
- In addition travel between two workplaces for the same job is allowable.
Expenses whilst travelling
- You can claim your expenses on your tax return or if you do not need to fill in a return - you can get form P87 - Expenses claim from your tax office.
- You will normally get any relief in your tax code.
- You can normally claim costs for meals and accommodation - called subsistence costs when you are away on business.
- You can also claim an allowance up to £5 per night to cover your personal expenses where you are away from home overnight on a business trip and this rises to £10 per night if you are overseas.
- However you cannot claim for other expenses such as telephone calls home or laundry but these may qualify for relief elsewhere
- If you have to travel on business you can get tax relief for the full costs of that travel. If the travel is by car you will need to look at the section Do I have to pay tax and NIC on my business travel?
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Other allowable employment expenses
Working from home
- Where it is necessary for you to work from home the Revenue have said that you can claim an allowance of up to £2 per week or £104 per year to cover your extra household expenses such as heat and light. To claim a higher amount than this it may be necessary to provide supporting paperwork or alternatively it may be necessary for your employer to show the Revenue that a higher claim is more appropriate. If you use a room exclusively for work you may also be able to claim part of your council tax.
Computers
- Where a computer is provided by your employer because it is necessary for you to be able to carry out the duties of your employment either at home or at work, it is highly unlikely that any private use made of that equipment will be significant when it is compared with the business need for providing the computer in the first place. In these circumstances no tax charge will arise.
Special tools and clothing
- The Revenue have agreed fixed amount for workers in a range of industries for tools or any special or protective work clothes which are not paid for by the employer. You simply claim the amount shown on the list for your type of industry or profession. You can find the list
here
- If you need to claim more than the set amounts you will have to agree this with the Revenue.
Professional fees and subscriptions
- These are allowable deductions if they are amounts you have to pay in order to carry on your profession e.g. doctors. The Revenue also allow annual subscriptions to certain professional organisations approved by them. You can find the list here.
Loans
- If your employer makes a loan to you - you are not taxed on the loan under PAYE unless it is interest free or at a rate of interest lower than the normal market rate. For interest or low interest rate loans and the benefits on them - have a look here.
Loan interest
- In certain circumstances you can claim a deduction for interest on a loan to buy equipment for your work (not cars or motorbikes) or shares in the business you work for. You will need to ask your tax office for more information if this applies to you.
Relocation expenses
- If you move home because of your job - any qualifying removal expenses or benefits are tax free up to a maximum of £8,000 per move if they are incurred during the period from the date of the job change to the end of the next following tax year.
- There are a number of conditions but generally allowable expenses include purchase and sale costs of your home, any bridging loan expenses, removal costs, any travel or subsistence involved in the move and the replacement of household goods.
- Any non qualifying expenses are treated like normal pay and taxed under PAYE. They will be shown on your form P11D or P9D (lower paid employees) for the tax year they are incurred.
- Any payment by an employer to compensate for negative equity in a property is not an allowable deduction and will be treated as normal pay.
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Tax relief on expenses for employed homeworkers
The following information has been taken from an HMRC article on homeworking expenses. It has been edited for the purposes of the website.
Conditions for relief
- You may be able to claim some tax relief for expenses that you incur and pay wholly, exclusively and necessarily in the performance of the duties of your employment when you work from home and such expenses are not repaid to you by your employer. In other words the expenses must be entirely and specifically connected with your employment.
- For an expense to be allowable it must be one that you have to incur solely because you hold the employment, and not because of any reasons personal to you. So any element of personal choice as to whether you work at home or at your employer's premises will prevent a deduction for those employees who choose to work from home.
- There are two tests normally applied:
- that the duties that the employee performs at home form a substantial part of the employment; and
- that there is a requirement that those duties should be carried out at the employee's home and nowhere else.
- Homeworking expenses are different from travelling expenses because the precise place where an employee lives is, usually, a matter of personal choice. It follows that the expenses of travelling to and from the employee's home are a direct consequence of that personal choice. However if you have a job the duties of which do require you to work away from the employer's premises the resulting expenses (ignoring travelling expenses) are likely to be much the same irrespective of where you happen to live.
- As a result the Revenue will accept that employees who work at home are entitled to a deduction for their additional household expenses where all the following circumstances apply:
- the duties that you perform at home are a substantial part of the duties of the employment. These are duties that you have to carry out and that represent all or part of the central duties of the employment,
- those duties cannot be performed without the use of appropriate facilities,
- no such appropriate facilities are available to you on the employer's premises (or the nature of the job requires you to live so far from the employer's premises that it is unreasonable to expect you to travel to those premises on a daily basis),
- at no time either before or after the contract is drawn up are you able to choose between working at the employer's premises or elsewhere.
- If one or more of those conditions are not satisfied the Revenue will argue that you are not entitled to relief for the expenses of working at home. You can appeal against any ruling if you consider you have a case to answer.
The expenses which qualify for relief
- It is a condition for relief that the expenses must be incurred wholly and exclusively in the performance ofyour duties. In practice that means that relief can only be allowed for:
- the additional unit costs of gas and electricity consumed while a room is being used for work,
- the metered cost of water used in the performance of the duties(if any),
- the unit costs of business telephone calls (including dial up Internet access).
- The following expenses are incurred mainly for domestic purposes and therefore do not qualify for relief:
- Council tax/rates,
- Rent,
- Water rates,
- Mortgage repayments/endowment premiums,
- Household insurance premiums.
- It may be difficult to work out exactly what costs are involved so the Revenue will accept that employees who satisfy the conditions for relief are entitled to a deduction of £2 (exclusive of the cost of business telephone calls) for each week that they are required to work at home, without having to justify that figure. If you want to deduct more than £2 per week you will be expected to keep records and to be able to show how each figure has been calculated.
- If your employer repays any of your expenses or makes you a payment towards them you must deduct this from any claim. Have a look at example 11 and example 12 which look at the deduction for an employee's non-refunded homeworking expenses and the separate exemption for homeworking expenses repaid by the employer.
For what periods do the rules apply?
- These rules will apply to any open cases but any settled liabilities will not normally be reopened. However if you have previously been denied relief for homeworking expenses, and you satisfy the conditions set out above, you may obtain relief for one or more years and we suggest you contact your tax office to see if this applies to you. In the absence of evidence supporting any greater amount relief will be limited to the figure of £2 per week mentioned above.
Examples (from HMRC article)
- In all the following examples, and unless otherwise stated, it is assumed that:
the duties that the employee performs at home are a substantial part of the duties of the employment, and those duties cannot be performed without the use of facilities at their home.
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Example 1
A lives in Glasgow and he works throughout Scotland for an employer whose nearest office is in Newcastle. A therefore carries out all his administrative work at home where he has set aside a room as an office. A is entitled to relief for the additional costs which he incurs as a result of working at home. The nature of his job requires him to live in Scotland, where no employer-provided office facilities are available.
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Example 2
B works for the same company as A. He carries out similar work in the North East of England. The company would be happy for him to work from its offices in Newcastle, but they have agreed that B can work from his home in Durham, where he has set aside a room as an office. B is not entitled to a deduction for his homeworking expenses because he is working at home by choice.
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Example 3
The company which employs A and B decides to close its regional offices and to operate solely from its head office in London. B is still based in the North East of England and he continues to work from his home in Durham. Following the closure of the Newcastle office he has no practical alternative but to provide himself with office facilities at his own expense. B is now entitled to relief for the additional costs which he incurs as a result of working at home.
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Example 4
A is promoted. That is normally a head office job. However A is a fervent supporter of his local football team and rather than relocate to London he persuades the company to allow him to continue to work from home. A is no longer entitled to a deduction for his homeworking expenses because he is now working at home by choice.
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Example 5
C works at his company's offices in Leeds. His home is in Kings Lynn and he spends the week in Leeds, travelling home at weekends. His employer then introduces a homeworking policy under which those employees who wish to do so can work from home. C accepts the offer and thereafter works from his home in Kings Lynn, where he sets aside a room for use as an office. He is not entitled to a deduction for homeworking expenses because he is working at home by choice. This example is based on a real case.
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Example 6
D lives in Gloucester and applies for a job with a company whose offices are in Birmingham. The company are happy to pay his expenses of moving from Gloucester to somewhere on the outskirts of Birmingham. However D does not want to disrupt his childrens' schooling, or to commute between Gloucester and Birmingham, so he asks the company if he can work from home. The company agrees, and D's employment contract says that he will be home based. He sets aside a room for use as an office. D is not entitled to a deduction for homeworking expenses because he is working at home by choice. The term in his contract of employment requiring him to work at home is simply an expression of his personal choice.
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Example 7
A company employs a team of sales people whose job is to follow up sales leads by telephone. The company trades from two small offices which house the director, her secretary and two clerical staff. There is no room for the sales team, who are recruited specifically on the basis that they will work from home. The members of the sales team are entitled to a deduction for the additional costs which they incur by working at home.
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Example 8
The company in example 7 becomes so profitable that it is able to move to larger premises. New recruits to the sales team are required to work at the company's premises. Existing team members who live within daily commuting distance are invited to do so. Those who decide to continue to work from home are now doing so by choice, and are no longer entitled to a deduction for a proportion of their household costs.
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Example 9
E is the UK sales representative of a Dutch company. The company does not have an office in the UK so E is recruited on the basis that he will work from home. He is entitled to a deduction for the additional costs that he incurs as a result of working at home.
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Example 10
F is a teacher at a secondary school. During term time she regularly takes work such as marking exercises home to complete in the evenings and at weekends. However she has free periods during the school day and the school has rooms available where she can mark papers if she wishes to do so. F is not entitled to a deduction for the expenses of working at home because appropriate facilities are available on her employer's premises. She may feel that those facilities are inadequate, but that is not enough to satisfy the statutory test. It is not an objective requirement of her job that she should perform any of her duties at home.
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Example 11
An employer introduces a homeworking policy under which employees who wish to work from home may do so. The employer makes a payment of £2 per week towards the additional household expenses of those employees who decide to work from home. The £2 per week is exempt from tax under current tax law. However employees who can show that working from home costs them more than £2 per week are not able to obtain a deduction for the excess because they are working at home by choice.
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Example 12
G is the North of England representative of a company whose only offices are in London. HMRC have agreed that he is entitled to a deduction for the expenses of working at home, and he produces evidence that his additional household expenses amount to £3 per week. However, his employer makes a contribution of £2 per week towards those expenses. That contribution is exempt from tax The amount G is able to deduct is therefore £1 per week, being the difference between his allowable, additional expenditure of £3 per week and his employer's repayment of £2 per week.
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Homeworking and broadband expenses
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Payroll giving
- If you pay tax through PAYE (Pay As You Earn), Payroll Giving is a way of making regular gifts to UK charities. It allows you to authorise your employer or company/personal pension payer to make the donation from your pay or pension.
- The payments are made before your tax is worked out and deducted so you get relief on your donation immediately at your highest rate of tax.
- For example - if you pay tax at the basic rate of 20%, and authorise a monthly donation of £10 - you save £2 tax (20% of £10). The actual cost of the donation to you is £8. If you pay tax at the higher rate of 40% and authorise a monthly donation of £10 - you save£4 (40% of £10). The actual cost of the donation to you is ?6.
- Payroll Giving does not affect any other donations you might want to make to charity. You can, for example, make other donations using Gift Aid if you wish.
- You can use Payroll Giving as long as both of the following apply:
- you are an employee or you get a company/personal pension and your employer or pension payer deducts tax through the PAYE system
- your employer or pension payer operates a Payroll Giving scheme.
- If your employer or pension payer does not operate a Payroll Giving scheme, they may be prepared to start one. They can find out about Payroll Giving schemes and contact details for Payroll Giving agencies on the HMRC website
- You can make a donation by authorising your employer or pension payer to deduct a set amount from your salary or pension income and then your employer or pension payer hands over your gift to a government approved Payroll Giving agency, which then passes the money on to your chosen charity.
- You do not have to tell your employer or pension payer which charities you support. The Payroll Giving Agency will provide you with a charity nomination form which you can complete and return directly to the agency to tell them where they should send your donations.
- Some Payroll Giving agencies can provide you with a charity card or cheque book so that you can make gifts directly to any charity whenever you want to.
- Once a gift has been deducted from your pay or pension no refund is possible. Some agencies may charge a small fee, which is deducted from your donation, to cover administrative costs.
- For more information have a look at the HMRC website.
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Ravi - mileage allowance over AMAP rate
Ravi uses his own car for his business travel. In the tax year 2008/09 (year to 5 April 2009) he travelled 8,000 miles on business. His employer pays him 45p per mile for all business mileage.
1
Ravi's business mileage was 8,000 miles
2
The AMAP rate for a car for the first 10,000 miles is 40p per mile. Using that rate Ravi would have been paid 8,000 x 40p = £3,200 (a)
3
Ravi was actually paid 45p per mile so his total allowance from his employer was 8000 x 45p = £3,600 (b)
4
The difference between (a) and (b) is £400 and so Ravi will pay tax on his profit of £400.
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Jock - mileage allowance under AMAP rate - MAR claim
Jock uses his own car for his business travel. In the tax year 2008/09 (year to 5 April 2009) he travelled 6,000 miles on business. His employer pays him 25p per mile for all business mileage.
1
Jock's business mileage was 6,000 miles
2
The AMAP rate for a car for the first 10,000 miles is 40p per mile. Using that rate Jock would have been paid 6,000 x 40p = £2,400 (a)
3
Jock was actually paid 25p per mile so his total allowance from his employer was 6000 x 25p = £1,500 (b)
4
The difference between (a) and (b) is £900 and so Jock will be able to claim MAR on £900.
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Janice - NIC on motor expenses
Janice uses her own car for business travel. In the tax year 2008/09 (year to 5 April 2009) she travelled 5,000 miles on business. Her employer pays Janice 50p per mile for all business mileage.
1
Janice's business mileage was 5,000 miles
2
The AMAP rate for a car for the first 10,000 miles is 40p per mile. Using that rate Janice would have been paid 5,000 x 40p = £2,000 (a)
3
Janice was actually paid 50p per mile so her total allowance from her employer was 5000 x 50p = £2,500 (b)
4
The difference was a profit of £500. Janice will pay NIC on £500.
If however Janice was only paid 30p per mile, she will not make any profit on her motor expenses as she is paid less than the AMAP rate. In that case Janice will not need to pay any extra NIC.
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