Are you aware of HMRC Mileage Allowance Relief rules? If you drive your personal car for business related travel, and you’re paying some of the costs, it’s something you need to know. You could be entitled to sizeable tax refunds for your travel costs.
There are lots of employees out there who don’t get fully reimbursed by their employer for fuel and other costs when using their personal car for business trips. The HMRC is aware of this which is why you need to know exactly how to claim back your business travel expenses.
We’re going to explain everything you need to know about claiming Mileage Allowance Relief so you can put more money back into your pocket.
The three steps to understanding Mileage Allowance Relief:
- A quick introduction to Mileage Allowance Relief
- Learn how to work out the Mileage Allowance Relief you can claim
- Learn how to claim your mileage back from the HMRC
Key questions you need answers to:
- Can I claim Mileage Allowance Relief as a self-employed?
- Can the amount of tax I receive from HMRC exceed the amount of income tax I paid in that year?
- Can I only claim mileage relief for the current tax year?
- What if I am owing money to HMRC prior to making a mileage allowance relief claim?
- Can I get mileage allowance relief for passenger payments?
- Can I claim a mileage allowance relief if I’m using a company car?
- Quick Tip – What evidence do I need to show to HMRC to claim tax relief?
1. A quick introduction to Mileage Allowance Relief
Mileage Allowance Relief is a tax refund from the HMRC for deducting the costs of business trips from your income.
Essentially, you can reduce the amount of pay you are taxed on. Your overall business expenses (including business mileage) can be taken out of your salary and you only pay tax on the amount leftover. If you’ve been paying business travel expenses out of your own money then you’ve also been paying more tax than necessary.
2. Learn how to work out the Mileage Allowance Relief you can claim
If you use your private car for business travel then your employer can give you Approved Mileage Allowance Payments (or AMAPS) to pay for your costs. These costs include fuel, road tax, car insurance and basically any cost which is incurred ‘wholly and entirely’ for business travel.
The HMRC allows a set amount for each business mile you drive, which factors in all the other costs of running a car, rather than just specifically your fuel. If you drive more than one vehicle, all of your business miles are calculated together.
The current approved rates are:
|Vehicle Type||Per Business Mile – under 10,000 miles||Per Business Mile – over 10,000 miles|
|Cars and Vans||45p||25p|
These rates are updated quarterly. If you want to make sure that you don’t miss an update, and subsequently any financial losses with mileage deductions, fill out the form below and we’ll keep you up to date:
The AMAP mileage rates don’t cover every cost related to using your personal car. Costs not covered include:
- Congestion charges
- Motorway Tolls
- Parking fees
- VAT on these costs (if you’re self-employed and VAT registered)
If, however, any of these charges were incurred solely for business reasons then they may still be an allowable deduction.
The actual amount that you claim from the HMRC at the end of the tax year varies depending on the amount that your employer decides to reimburse you. Let’s look at a few different scenarios:
Your travel 12,000 business miles in your own car – using the AMAP rates, the approved amount for the year would be £5,000 (10,000 x £0.45 + 2,000 x £0.25).
Example #1 – Employer reimburses you for all of your business travel expenses:
Your employer reimburses you £5,000. In this case, you wouldn’t be able to claim any mileage from the HMRC, and your employer wouldn’t have to pay any tax on the £5,000 that they reimbursed you.
Example #2 – Employer pays only 25p per mile for all 12,000 business miles that you have driven:
Amount paid by the employer: £3,000 (12,000 x £0.25)
Difference: – £2,000
You would be able to claim the remaining £2,000 at the end of the tax year with HMRC. You cannot claim for expenses that have been already reimbursed by your employer.
Example #3 – Employer pays 60p per mile for all 12,000 business miles that you have driven:
Amount paid by the employer: £7,200 (12,000 x £0.60)
Difference: + £1,200
Your employer has to report this amount to the HMRC and pay a fuel benefit charge on the extra £1,200 that you received from them.
If you want to explore AMAP rates in detail and learn more about how they benefit employees, you will find everything you need in our HMRC Private Car Fuel Rates article.
3. Learn how to claim your mileage back from the HMRC
There are two different scenarios:
Claiming tax back on mileage – P87 form:
Each tax year you can fill out a P87 form to claim tax relief on your expenses when your claim has a value under £2,500.
Your Mileage Allowance Relief will vary depending on the rate of tax you currently pay. For example, if you pay the basic tax rate (20%) and are claiming tax relief on £2,000 of allowable expenses, you’ll receive £400 back.
You will need a new P87 form for every job you want to claim Mileage Allowance Relief for. This form can also be used to claim on other business expenses such as union fees, accommodation and other travel expenses.
How to claim mileage allowance relief on self-assessment:
Claiming tax back on mileage with a P87 is only possible if your expenses are less than £2,500 per year. If you’re claiming more than this, you need to submit a self-assessment tax return instead.
If you normally have to fill in a self-assessment form then you can claim your tax relief on this document rather than using a separate P87 as well.
Whichever document you use, it’s important to know how to claim mileage allowance relief on self-assessment because it’s up to you to seek it and your employer will not do this for you.
Can I claim Mileage Allowance Relief as a self-employed?
Mileage Allowance Relief is different to claiming mileage or business travel expenses as a self-employed individual. In this article, you can find out more about claiming mileage as self-employed.
Can the amount of tax I receive from HMRC exceed the amount of income tax I paid in that year?
You can only claim Mileage Allowance Relief equal to or less than your income tax in a year. For example, if your tax relief is worth £6,000 for a year but you only paid £5,000 in income tax, then £5,000 is the maximum you can receive as a tax refund. This is because you are being reimbursed for tax taken by the HMRC, so they can’t refund you more than you originally paid.
Can I only claim mileage relief for the current tax year?
Currently, the HMRC allows you to claim tax relief going back as far as 4 tax years. You cannot include expenses incurred this current tax year since you need to wait until the end of the tax year to submit it.
What if I am owing money to HMRC prior to making a mileage allowance relief claim?
Employers sometimes require employees to travel to their permanent workplace outside of normal working hours, for example, during the weekend. Such trips don’t qualify for mileage allowance relief as all journeys between the employee’s home and permanent workplace are considered to be ordinary commuting journeys.
Can I get mileage allowance relief for passenger payments?
If you are carrying another employee in your vehicle you will not receive Mileage Allowance Relief for the extra passenger. However, your employer, if they choose, can increase your mileage allowance payments to account for this.
Can I claim a mileage allowance relief if I’m using a company car?
Mileage Allowance Relief is only applicable for business trips in your personal car. Find out more about company car mileage allowance rates here.
Quick Tip – What evidence do I need to show to HMRC to claim tax relief?
Firstly, you need to make sure that you are classifying your trips as business or personal correctly.
A business journey is defined as travel an individual is obliged to make in order to complete the duties of their employment. After you have identified all your business trips, you and your employer need to keep a hold of all your important mileage record details to make claims accurate and compliant, such as:
- The dates and times of the trip
- Start and end addresses
- The mileage travelled
- Reason for the journey
- Amount claimed
However, there are a lot of caveats, and a few exceptions that might benefit you or your business, which are worth exploring in detail in our What is Business Mileage? article.
If this seems too much of a hassle for you, especially if you drive for business regularly, you can opt to use Autotrip, a mileage tracking solution that records all your business trips and saves all of this info for you automatically.
Find out how Autotrip can help you keep track of your mileage at autotrip.com and put more time back into what really matters to you.