L4 Q2022 Personal tax Assessment 2 Task 6 b Mrs S

Anzelari

Hi,

I would appreciate your help with Assessment 2 Task 6b Mrs S.
My logic:
Employer paid £6,000 for business miles. Less £5000 allowance (10000*0.45+2000*0.25). £1000 × 40% = £400 tax to pay. In 23/24, employer paid £4800 less the allowance , £0 is remaining, no tax. Therefore, MrsS will save £400 . Why is 480 in the answer? What am I missing?

Or
If don't account the mileage allowance
Then, 6000 - 4800 = 1200 x 40% = 480. If that correct, what is the purpose of mileage allowance?

Thank you,
Anzelari

Anzelari

Hi,
Found some information on www.gov.uk
" your employee will be able to get tax relief (called Mileage Allowance Relief, or MAR) on the unused balance of the approved amount"
This means that if Employer paid £4800, then Employee can claim tax relief on £200. That could explain the answer.

LucyWisniewski

I think the answer is:

12,000 x 50p = £6,000 - this is what she received before (50p a mile)

then if reduced to 40p a mile, 12,000 x 45p = £4,800

the difference of the two is £1,200, and as she is a higher rate tax payer

£1,200 x 40% = £ 480 saving