Hi ASB,
This is the kind of thing that can start to get very complicated very quickly because there are so many scenarios to consider. But some general pointers for you are;
(1) Generally I would always advise a client to avoid putting business expenses through the personal tax return as they are more easily picked up and challenged by the HMRC (though I think Mileage would survive a challenge easier than most expenses);
(2) For a higher rate tax paying contractor with a £7,475 salary, putting £1,000 in mileage through the personal tax return rather than the business would result in a £25 tax saving (when including corp tax and personal tax);
(3) Following on from (2), you would also have an extra £800 in retained earnings in the business to extract, which would incur a further £200 in personal tax - so overall you are worse off;
(4) If you have earnings from other sources (or get a salary > £7,475) then the picture changes. Adding say £2,000 of net interest income to the above scenario, the overall tax savings for putting mileage through the SATR is £125 - however you are still stuck with the problem highlighted in (3) above;
(5) The only other way to treat the extra retained earnings from (3) is to extract it from the company when closing and pay 10% CGT assuming ER applies;
(6) Summary 1: So if you are a higher rate taxpaying contractor with a £7,475 salary, there is no benefit in putting mileage through SATR.
(7) Summary 2: The only scenario I can see a tax saving is if you are a higher rate taxpaying contractor with a £7,475 salary AND have other forms of income AND intend to keep your mileage savings as retained earnings until you close the company AND are eligible for ER, then for each £1,000 in mileage you put through SATR you will save £45 in tax;
(8) Summary 3: I think just better to claim mileage through the company
I have used 2011/12 tax rates in the above calc cause its easier for me
This is the kind of thing that can start to get very complicated very quickly because there are so many scenarios to consider. But some general pointers for you are;
(1) Generally I would always advise a client to avoid putting business expenses through the personal tax return as they are more easily picked up and challenged by the HMRC (though I think Mileage would survive a challenge easier than most expenses);
(2) For a higher rate tax paying contractor with a £7,475 salary, putting £1,000 in mileage through the personal tax return rather than the business would result in a £25 tax saving (when including corp tax and personal tax);
(3) Following on from (2), you would also have an extra £800 in retained earnings in the business to extract, which would incur a further £200 in personal tax - so overall you are worse off;
(4) If you have earnings from other sources (or get a salary > £7,475) then the picture changes. Adding say £2,000 of net interest income to the above scenario, the overall tax savings for putting mileage through the SATR is £125 - however you are still stuck with the problem highlighted in (3) above;
(5) The only other way to treat the extra retained earnings from (3) is to extract it from the company when closing and pay 10% CGT assuming ER applies;
(6) Summary 1: So if you are a higher rate taxpaying contractor with a £7,475 salary, there is no benefit in putting mileage through SATR.
(7) Summary 2: The only scenario I can see a tax saving is if you are a higher rate taxpaying contractor with a £7,475 salary AND have other forms of income AND intend to keep your mileage savings as retained earnings until you close the company AND are eligible for ER, then for each £1,000 in mileage you put through SATR you will save £45 in tax;
(8) Summary 3: I think just better to claim mileage through the company
I have used 2011/12 tax rates in the above calc cause its easier for me
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