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Class 1 NICs are paid on the earnings.
the earnings include any payments received from the employer for use of the employee’s own car.
Can i please know how its calculated?It will not include amounts received it will only include the employment income assessment that arises out of a payment in excess of the authorised mileage allowances
so for example,if the mileage is 10500 miles and the employer reimburses £4700.
will the amount taken for NIC be same as statutory mileage,like this:
£ 4700- [ (10000*0.45) + (500* 0.25) ] = £75
or will it be
£4700 -(10000*0.45) = £200
Thank you Avishco.
But in the BPP study text it is stated
“Earnings also include payment for use of the employee’s own car on business over the approved amount of 45p per mile (irrespective of total mileage.) Therefore, where an employer reimburses an employee using his own car for business mileage, the earnings element is the excess of the mileage rate paid over 45 per mile.This applies even where business mileage exceeds 10,000 in a tax year.”
so according to what i understand from the above statement,shouldn’t the answer be
£4700 -(10000*0.45) = £200
Hi guys can I just say firstly that this exam will be passed by understanding and being able to apply basic concepts not individual points of fine detail and it is those basics that you should be focused on at this stage. This issue really should not be concerning you unless you are totally comfortable with the key concepts already.
However to clarify the issue you should , for NIC purposes use just the 45p rate but for all miles, so the answer to your query would be:
10,500 x 45p = 4725 – 4700 =25
As the reimbursement is actually less than the authorised rate allows there will be no NIC charge
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