1. my wife's mileage expense is reimbursed by one of her employers ( rate 40p per mile). She uses a privately owned car. She has several other jobs that are not subject to PAYE and so she needs to complete a tax return.
Q. Does my wife need to declare this mileage expense that has been reimbursed? My understanding is that HMRC allow a tax free mileage allowance of 40p per mile upto a certain mileage. So, do we need to record and declare this reimbursed expense?
2. Wife pays employee contributions into a pension scheme. These contributions are not deducted by an employer, she simply posts a cheque every month to her scheme.
Q. Should we record these payments? I think these pension payments should be deducted from her taxable income?
1. Reimbursed mileage is tax free and as I understand it does not need to be declared on her tax return if she is reimbursed at the HMRC approved rates.
2. Personal pension contributions need to be 'grossed up' on her Tax return. This increases the basic allowance. They are not deducted from her taxable income.
Email me if you want me to show you a tax comp to show the impact of personal pension contributions
Hope that helps
Jeremy Optegra Financial
Jeremy@optegra-financail.co.uk
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Re:1. I won't bother recording her reimbursed mileage expense.
Re:2
I'm no expert on tax sorry. But am I correct that "ad hoc" personal pension contributions ( where a cheque is simply sent off to the pension scheme) should be declared on her tax return and are taken into account by HMRC when calculating taxable income?
So for example she is paid £1000 gross per month and then sends a cheque off for £100. Taxable income is 1000-100 = 900? That's what I meant by "deducted from her taxable income".
But you seem to say that HMRC would tax the £1000 and add the £100 to her personal allowance via her tax code? HMRC did do this for her professional subscriptions actually (she's a doctor).
So for example she is paid £1000 gross per month and then sends a cheque off for £100. Taxable income is 1000-100 = 900? That's what I meant by "deducted from her taxable income".
But you seem to say that HMRC would tax the £1000 and add the £100 to her personal allowance via her tax code? HMRC did do this for her professional subscriptions actually (she's a doctor).
The personal pension payments should be disclosed on her tax return but it will only affect her tax liability if she is a higher rate (or additional rate) taxpayer.
If she is a higher rate taxpayer then, subject to the pensions annual allowance, she will get 40% tax relief on her personal pension contributions. 20% of this is given at source - the £100/month payment is treated as being the net contribution and the pension provider claims back 20% tax from the government. This means that her pension fund increases by £125/month.
As GJRobbins stated, the gross pension payments are disclosed on the tax return which, for a full year of contributions, results in the level of income at which she becomes a higher rate taxpayer being increased by £1,500 (£125 x 12). This means that £1,500 of income that would previously had been taxed at 40% is now taxed at 20%. In this way, she has received 40% tax relief - half obtained by her pension provider, half obtained through her tax return.
It may well be that, once the tax return has been submitted, HM Revenue & Customs will amend her tax code to try and take account of the pension payments being made.
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Pearce & Co - Chartered Accountant and Chartered Tax Adviser
With regard to the mileage allowance, the approved HMRC rates, since 6th April 2011, for cars are 45p per mile for the first 10,000 miles and 25p per mile thereafter.
Therefore, if your wife is receiving 40p per mile from her employer she can make a claim in her Tax Return for the difference.
e.g.
Your wife has done 10,000 business miles and received £4,000 (40p per mile) from her employer, Under HMRC rates she should have received £4,500 (45p per mile) and, therefore, she can make a claim for the difference of £500 in her tax return,
