Many people who have to travel for their job don’t realise they are entitled to Mileage Allowance Relief. This will reduce your income tax, if your employer pays less than 45p per mile. This post explains how the calculations work and how you should claim the tax relief.
You can only claim relief for business mileage incurred when you use your own car, not a company car. This can include travel to a temporary work place but it doesn’t include your normal commute between home and your usual workplace.
How much can you claim?
You can claim 45p per mile for the first 10,000 miles and 25p per mile for any additional mileage. (The rates for motorcycles and bicycles are given here.)
From this you deduct the total amount of any money you have received from your employer for this travel. This includes any monthly regular payments as well as any mileage amounts. The calculations are done on a tax year basis, so it doesn’t matter if your travel patterns are irregular and some months you have received more from your employer than you have travelled – just add up total miles travelled during the tax year and total amounts received relating to that tax year.
How much money will you get?
You are claiming relief from income tax – the amount you claim for is deducted from your salary. So if you claim £800 and you are a basic rate tax payer, your tax will be reduced by £160. If you are a 40% tax payer, your tax will be reduced by £320.
If you don’t pay tax at all, you can’t benefit from this. This is a shame as one of the hardest hit groups by motoring costs are care workers who usually have to use their own car to travel between clients, are poorly paid and work part-time – so they are often below the tax threshold 🙁
How to claim
If you have to complete a Self Assessment tax form, then you enter the details of your business mileage in the Employment section.
If you don’t complete a Self Assessment form and this is the first time you have claimed (which it probably is if you have read this far!) then you will need to complete HMRC form P87. You need to keep records of dates, mileage and details of all work journeys so you can calculate the figures for the form, but the form itself is pretty simple – you don’t have to supply receipts for petrol or list all the journeys.
In subsequent years, you can claim by phone if your claim is for less than £1,000. Or you can phone them and ask them to send you a P810 form. To be honest, it’s probably easiest to just download another P87 form and complete that!
You can claim for previous tax years going back 4 years, ie any claims for the tax year ending 4 April 2010 have to be submitted by 4 April 2014, by submitting a P87 for each tax year.