For journeys such as client visits, weekly bank runs, or working from different offices to the one you are based in, you could be owed a substantial amount in overpaid PAYE income tax if you have not already submitted a claim.
You’ll need to hurry however – as there are strict deadlines in place for those wishing to make a claim. The sooner you apply, the greater your tax refund could be!
Everything you need to know about claiming mileage.
UK taxpayers are now able to claim Mileage Allowance Relief, a special kind of income tax rebate, when they use their own vehicle for work mileage. If you’ve used your own car for work at any point since April 2009, it’s time to find out how much you could be owed.
It is a fairly common practice for employees to use their own vehicles for business travel, and in recompense they are generally able to claim the expenses for fuel or mileage from their employers. What might not be well known is that if your employer does not pay you any mileage expenses – or if you are only paid a low amount for each mile travelled – then you may be eligible to claim mileage allowance relief, in the form of a tax rebate, from HM Revenue & Customs.
Approved Mileage Rates
HMRC sets what it calls ‘Approved Mileage Rates’ and if the rate your employer reimburses you for mileage is lower than the HMRC’s approved rates, then you will be entitled to tax relief on the difference. This tax relief is referred to by HMRC as Mileage Allowance Relief, and there are three different mileage rates to cover different types of vehicle: the rate for vans and cars is set at 45p per mile for the first 10,000 miles and 25p per mile after that; motorcycles at 24p per business mile, and bicycles at 20p per mile.
You can backdate your mileage allowance claim by up to 4 years.
If you have never claimed before but you have been using our own vehicle for work-related travel, then you can make a claim mileage as far back as April 2009. If, since that time, you have been reimbursed by your employer at less than 45p per mile, then the chances are that you could qualify for a tax refund. There is a whole host of information and guidance available for would-be claimants in our support pages – the main thing you will need to be clear on is how your vehicle usage relates to your work; remember, travel between home and your permanent place of work is generally not allowable for tax.
Am I entitled to submit a claim?
You can work out if you are entitled to this tax relief by multiplying your total business miles for the year by the approved mileage rate, which will give you the approved amount. It’s then simply a case of comparing this amount to the total mileage allowance payments you have received for the year from your employer. If the total payments from your employer are less than the HMRC’s approved amount, you will qualify for relief on the difference. However, if the payments from your employer are more than the approved amount, you will need to pay income tax and NICs on the extra. Our tax team has compiled a comprehensive mileage allowance tax rebate calculator to do this for you – please see the link above.
There are different types of travel you will use your vehicle for: journeys to and from your normal workplace, your private travel outside work hours and your business-related travel – so you will need to keep clear records of all your business travel to keep it distinct from the other times you use your vehicle. You should maintain records of dates, mileage and details of all business-related journeys. You will normally need this for your employer so that they can make the correct expenses payments, but you will also need this if you want to claim for any Mileage Allowance Relief.
For many years Britain had a company car culture; the perk was much more prevalent than it ever was in our major European competitors such as France or Germany, or even in the US. Figures show that numbers are dropping, perhaps due to companies trying to cut costs during the recent economic downturn, but clearly, employees still have to make business journeys and in this case more are being asked to use their own car.
In this situation most employers will pay your expenses but if they don’t, or if they pay too little, you can claim back the tax from HMRC. HMRC publish an approved mileage rate for business use of your personal car. This is a flat rate of 45p for each mile for the first 10,000 miles and 25p thereafter. Drivers of motorcycles get a standard rate of 24p and even cyclists get a rate of 20p. This may seem a lot but the payments are meant to cover more than just fuel; it is also intended that they cover a fair proportion of other expenses, such a wear and tear, while the car is being used for work.
What does the mileage allowance cover?
If you look at the amount you can claim through the mileage allowance compared with the cost of fuel, it might appear a fairly healthy amount. However, fuel is only one component of the allowance, which is designed to cover you for all relevant expenses. It takes into account the entire cost of driving the car, including insurance, tax, maintenance and depreciation. This means that it’s not quite as generous as it first appears.
Every employee will receive a standard amount for each mile they travel, which will depend on the amount of tax they pay. The allowance doesn’t take into account the age or specification of the vehicle. Therefore, someone who drives a powerful, brand new car will receive the same amount per mile as the driver of a 15-year-old car with a smaller engine. The amount you receive is calculated on the average cost of running a vehicle. Depending on the car you drive you might receive more through the allowance than it actually cost you, or you might be unlucky in that your mileage claim won’t cover everything. If this is a serious concern for you, then it might be worth considering the type of car you drive and opting for a model that doesn’t cost as much to run.
Some drivers are always worried when the price of fuel rises, but the tax allowance doesn’t increase. Fuel costs have risen sharply in recent years, whereas the amount you can claim for mileage has stayed the same. However, as fuel is only one aspect of the allowance this might not affect the value of your claim. One cost of running the car might have increased, such as fuel, but other costs (e.g., the price of services) might have fallen.
The mileage allowance might not always seem the fairest way of reimbursing drivers, especially if you drive an expensive vehicle. However, it’s definitely the easiest way. If car users were forced to account for every cost associated with their vehicle and then work out the proportion attributable to business mileage, it would be a significantly more complex process.
Tax Office definition of Business Mileage
Put simply, business mileage is any mileage that you do whilst doing your job. Sometimes it can include the travel you make to a temporary workplace. However, it does not cover the normal travel that you make between your home and your permanent place of work. It also does not cover any private travelling that you do.
Business Mileage and Your Own Vehicle
If, for instance, you are a nurse and you need to travel around the community, then you might be able to claim for business mileage as long as you are using your own car for this. Construction workers may also be able to claim business mileage if they use their own vehicles to travel between building sites and places of trade.
It doesn’t matter what type of vehicle you use. Whether it is a bicycle, moped, motorcycle, car or van, you are usually entitled to get business mileage tax relief if the vehicle is your own.
Payments for carrying passengers
When using your own vehicle for work purposes, not only are you allowed to claim back your mileage, you are also entitled to claim extra money for carrying passengers, at a rate of 5p per passenger, per mile. As long as the amount paid per passenger, per mile doesn’t exceed 5p, the payment for carrying passengers is also exempt from tax. If you are paid a rate higher than this, then the first 5p per mile is still exempt, although you must pay tax on anything above this. This means that if you have been paying tax on payments received for carrying passengers, you may be entitled to claim it back. Payments for carrying passengers may also be paid to those using a company car or van, as long as that vehicle is not a pool vehicle.
How do mileage allowance and passenger payments work?
Mileage allowance payments (MAPs) are generally paid to employees to compensate them for the expenses they incur by using their own vehicle for business travel. Business travel can be defined as any journey that forms part of an employee’s work duties, or any travel that is necessary to travel to a temporary workplace. In addition to the standard MAP, employees carrying other employees for the purpose of work can be compensated 5p per passenger per mile.
How does it work in practice?
You are entitled to 45p per mile tax free for using your own vehicle for work. You are allowed a further 5p per passenger per mile for carrying other employees. A construction site worker who is asked to work temporarily on a different site is entitled to claim 45p per mile. For carrying a fellow employee also working at the temporary site, the driver is entitled to a further 5p per mile. The driver can therefore claim tax relief on a total of 50p per mile. The mileage can be calculated to include any extra miles travelled by the driver to allow him to collect his passenger from their location.
What happens if I don’t make a claim?
These days we are all living such busy lives that looking into claiming back tax on work miles is often the last thing on our minds. Many people are oblivious to the fact that they could be in line for a substantial refund. It is common for employees to assume that their business travel miles will be totally covered by their tax code and believe they will automatically be reimbursed the full amount. However, this is often not the case.
This is a situation where you, the tax payer, must take control and be proactive. It is a classic case of if you don’t ask, you won’t get, and the money that you are entitled to will simply vanish into the government’s coffers.
It is simple to work out whether you are owed a rebate. If you have used your own car for business travel (not including your commute) since April 2009, and have been paid less than 45p per mile by your employer, you are highly likely to be eligible for a tax refund. While the government does action rebates for taxpayers who have been on the wrong tax code, this system does not apply to tax on business mileage. If you fail to act within the inflexible government time constraints, you will get nothing as the onus is on you the individual you to submit and follow up the claim.
If you incur mileage in your own vehicle as part of your daily work for your employer, you are entitled to make a claim for your costs. Currently, HMRC states that you can claim 45p per mile (up to 10,000 miles, after which the rate drops to 25p) if you drive a car or a van, 24p for a motorcycle and 20p for a bicycle. If your employer pays you less than this, you can get your tax back on the difference. We look at the rules surrounding this complex issue.
The situation as it stands
There are many jobs that require employees to drive to visit other offices, meet with clients or see prospective new customers. If this is your situation, you are entitled to claim business mileage from your employer. The rate set by HMRC is a guideline that takes into consideration the cost of fuel and depreciation, or wear and tear, of your vehicle.
Employers are not legally required to pay the full amount. While most do pay the full rate, some pay less. If this is the case with your employer, you can apply for tax relief or Mileage Allowance Relief on the difference between your entitlement (as per the above guidelines) and the amount you were paid.
As with most things to do with tax, it’s a complex issue. Fortunately, there are easy-to-follow guidelines on the HMRC website. In an effort to simplify the matter even further, we have outlined the basics below.
- The rules on business mileage claims apply to individual tax years.
- They also apply to cars, vans, motorcycles and bikes driven or ridden during the course of one individual employment (other rules apply if you have two or more jobs).
If the amount you have received from your employer is less than the approved amount, you can make a claim for Mileage Allowance Relief on the difference.
If you’ve used your own car for work mileage at any point since April 2009, you could be entitled to a substantial tax rebate from the UK tax authorities, HM Revenue & Customs. Let our experts guide you through the minefield that is claiming Mileage Allowance Relief.
Frequently Asked Questions on Mileage Allowance Claims