If you are required to use your own vehicle for work, you may be able to claim Mileage Allowance Relief from HMRC based on the number of business miles you travel. This tax relief could be worth up to 45p for every mile you have traveled since April 2011!
How does Mileage Allowance Relief work?
When your employer calculates the amount of tax to deduct from your wages, they will usually total up your salary and then deduct certain allowable expenses. The final figure becomes your taxable pay – i.e. the amount on which you are required to pay tax on.
So, the lower your taxable pay, the less tax you pay. Mileage Allowance Relief works by reducing your taxable pay based on the total number of business miles traveled in the year, multiplied by specific ‘Approved Mileage Rates’ by HMRC. Any amount reimbursed by your employer reduces this relief.
In order to receive Mileage Allowance Relief, you must claim it – it is never given automatically. In a nutshell, if you haven’t claimed the correct allowable expenses, your taxable pay is too high and you would have paid too much tax.
What counts as business mileage?
Quite simply, business mileage is any mileage you incur in fulfilling the duties of your job. It does not include travel from your home to your permanent place of work.
For example, a builder may be required to visit different construction sites in his own car, or a healthcare assistant may be required to make home visits as part of their job.
If you are unsure if your journey counts as business mileage, please contact us and we will be happy to advise.
What if my employer reimburses me?
You may still be able to claim depending on how much your employer pays you per mile. There are specific amounts on which HMRC are prepared to allow tax relief. If your employer pays you less than this, you can claim tax relief on the difference.
How much can I claim?
Mileage Allowance Relief can be calculated by multiplying your business mileage by the Approved Rates set out below.
This will give you the amount on which you can claim tax relief amount, not the rebate. You will usually receive 20% – 40% of the final amount back as a rebate depending on the rate of tax you pay.
You travel 5000 miles per year in your own car to visit clients and suppliers. Your employer pays you 25p per mile:
2011/12 5000 x (45p-25p) = £1000
2012/13 5000 x (45p-25p) = £1000
2013/14 5000 x (45p-25p) = £1000
2014/15 5000 x (45p-25p) = £1000
Total Mileage Allowance Relief = £4000
Total tax rebate: £5,000 x 20% = £800
Are there time limits for claiming?
You must claim within 4 years after the end of the tax year. This means you claim relief on all mileage incurred since 6th
April 2010, but not anything prior to that. You can claim even if you are no longer at the same employer.
How to claim Mileage Allowance Relief
We provide the most streamlined service in the industry for claiming your Mileage Allowance Relief. We only need a few details from you in order for our accountants to review your claim and process the rebate with HMRC. Simply head to our calculator to see if you are eligible and get started with your claim.