The Telegraph claims that the failure to increase the tax-free allowance of 40p a mile for using your own car in your job amounts to a stealth tax. Apparently the average cost of motoring is now 44p a mile and therefore "millions" of car drivers are losing out.
Now, in general I can't stand stealth taxes and am always quick to point them out. But to claim that this is a stealth tax is rubbish.
Although lots of people will come up with reasons why this doesn't apply to them, I would suggest that nobody has to pay more than 40p a mile to run a car. It's perfectly possible to run a car that's adequate for any more or less any purpose for less than that amount.
When I was a recently qualified accountant, I went on secondment to a client. I drove there four days a week, a 130 mile round trip, and got 40p a mile for my trouble. This was in 2001, I think, so it's right to say that the 40p hasn't gone up for a long while. I calculated that, at the time, my car was costing me 15p a mile to run, all in, or something like that - petrol was cheaper then, and my servicing and repair bills were really low. So four days a week I was being given £52 in mileage and it was costing me just £19.50. On the basis that I was doing that 20 times a month, I was profiting by £650 a month, tax-free! In the six months I was on secondment at that client I had more money in my pocket than I ever had before, and probably more than I did for the next few years.
The reason, of course, was that my car - while reliable - had little (almost zero in fact) capital value. It's depreciation that is often a big chunk of your motoring expenses. And if you are running a new or expensive car, you must accept that you are choosing to do that. It isn't necessary, and you can't blame the government if they won't let your employer reimburse all your costs!
I am not saying that it is bad to run a new/expensive car, and that anyone driving an older/cheaper/more fuel efficient car has the moral high ground - that may be the case, but it's not necessary to sustain the point that I am making. I am saying that you are choosing to incur extra costs, because of some non-financial benefit that - knowingly or not - you believe that the car gives you. If you love cars, and drive a Ferrari costing you £1.50 a mile, that is absolutely fine with me - but it isn't reasonable to expect the taxpayer to subsidise it! Bluntly, anyone who buys a new car, claiming it's because it is more reliable, or the running costs are lower than their last one is generally talking nonsense. They just wanted a new car and are making up spurious benefits to justify it to you - and to themself.
I've done a quick back of the envelope calculation of my motoring costs for the last year. I reckon my car cost me 29p a mile for the 10,000-odd miles I've done. The key thing is that I reckon my car has only depreciated in value by £1,000 in the year. If it had depreciated by £5,000 it would cost me well over 40p a mile. But as things stand, most people could do what I'm doing and be ahead. Clearly this isn't a stealth tax - I can completely avoid paying it!
So, I would suggest that, rather than seeing the 40p a mile rate as a stealth tax, you should see it as an opportunity to have your motoring costs subsidised by the taxpayer! See the glass as half full, not half empty.
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