Mileage Allowance Relief
There are many reasons why people need to use a vehicle for work. This can range from the obvious such as a tradesman travelling between jobs but can also include the likes of someone working from home needing to meet with potential suppliers.
24th June 2022
There are many reasons why people need to use a vehicle for work. This can range from the obvious such as a tradesman travelling between jobs but can also include the likes of someone working from home needing to meet with potential suppliers. Even when using a company vehicle, you may sometimes have to buy fuel with your own money.
Sometimes, you can claim mileage allowance from your employer for those business trips made with your vehicle or facilitated with your own money. However, when you cannot claim mileage allowance from an employer or when you are not fully reimbursed, you can claim the Mileage Allowance Relief.
Here we’ll look at how the Mileage Allowance Relief works and how it can help you.
Mileage Allowance Relief – What is it?
When you use your personal vehicle for business-related driving, the HMRC suggests that your employer should reimburse you the business mileage but this is not a legal requirement. This reimbursement is called Mileage Allowance Payment (MAP).
However, if your employer either does not reimburse you for your travel costs, you will be eligible for the Mileage Allowance Relief (MAR).
What Does Mileage Tax Relief Cover?
You qualify for mileage tax relief if your trip was for business purposes. According to the HMRC, business trips include:
- Any travel made between your permanent workplace and your temporary workplace (e.g., visiting suppliers and clients)
- Any travel between temporary workplaces (e.g. moving from one client base to another)
- Any travel made between two workplaces in the same employment (e.g. moving between branch offices)
Thus, travel from your home to the office (and back) does not qualify as a business trip towards claiming tax relief. The only exception is when your “home” is your permanent workplace, and you travel from it to a temporary workplace (e.g. remote workers visiting a client).
What the Mileage Tax Relief covers depends on whether the vehicle used for the business journeys is a personal vehicle (bought or leased with your own money) or a company’s vehicle (owned or leased by your employer).
When you use a personal vehicle, the tax relief covers all costs related to owning and maintaining the vehicle for its business-related use. These include maintenance and repair cost, vehicle insurance, fueling, etc.
Rather than asking you to separately keep a log of all these expenses, they are factored into the mileage rates. This means you can’t claim for large expenses separately such as repairs but it does make the process much simpler.
When you use a vehicle that is owned and leased by your employer, the tax relief only covers fuel and/or electricity.
What Are the Rates?
The rate of mileage allowance relief depends on the type of vehicle you use as follows:
- Cars and vans: 45 pence for the first 10,000 miles, and 25 pence for every mile after
- Motorcycle: 24 pence per mile for every mile travelled
- Bicycle: 20 pence per mile for every mile travelled
To illustrate this:
When driving your car for business trips, assuming you had a total of 13,000 miles in a tax year. The mileage allowance rate (MAR) will be 45p for the first 10,000 miles, and 25p for the other 3,000 miles. That is, 45% of 10,000 (£4,500) + 25% of 3,000 (£750) = £5,250.
However, if the trip was made by motorcycles, the MAR will be 24p for the whole mileage. That is, 25% of 13,000 = £3,120.
In the same vein, if the trip is made with bicycles, the MAR will be 20p for the whole mileage. That is, 20% of 13,000 = £2,600.
Do You Need Proof of the Journeys?
To claim Mileage Allowance Relief, you need to keep a mileage log, which is a document that gives irrefutable evidence of the business journeys.
The particular items that go into a mileage log may differ from one employer to another. However, according to the HMRC, a mileage log should include the following information:
- The date of the journey
- The exact addresses where the trip started and ended (including postcodes)
- The total miles covered on the whole trips
- The amount of mileage allowance received (what your employer reimbursed you for your business mileage)
What Are The Rules For Claiming Mileage For The Self-Employed?
When claiming mileage tax relief as someone who is self-employed, the rules are a little different. Here you have both options of either the more detailed or simple way of claiming expenses. Let’s first look at factors that can affect your claimed mileage.
When you use a Trading Allowance – People who use a trading allowance cannot claim a mileage allowance relief. As a self-employed person, a trading allowance will give a tax exemption of up to £1,000 a year.
When you have a limited company – If you are self-employed and run your own limited company, you are your own employer. Therefore, you can pay yourself Mileage Allowance Payment (MAP) from the company.
If the business trips were made using your private vehicle, you can claim MAPs, however, if your limited company owns the car, you can only claim fuel rates as you’ll be able to claim for other expenses through the business.
When you also use the vehicle for private purposes – If you are self-employed and use your vehicle for both private and business trips, you can claim the mileage allowance relief on only the trips that are business related.
There are two ways to claim mileage allowance relief, using actual vehicle expenses or using simplified expenses.
Self-Employed Mileage Allowance Relief Using Actual Vehicle Expense
When using your actual vehicle expenses, you have to record all the costs you incurred in using your vehicle for business trips in the tax year. The total costs are then deducted from your taxable profit.
Thus, this method is relatively difficult and time-consuming as it requires you to track every vehicle expense. However, it may be better for you if you usually have high vehicle expenses.
The vehicle costs you can add when calculating your mileage tax relief include:
- Maintenance and repairs
- Breakdown cover
- Vehicle insurance
- Licence fees
- Parking fees
- Travel expenses (airfares, accommodation, etc.)
Self-Employed Mileage Allowance Relief Using Simplified Expense
The simplified expense method means using a flat rate to calculate your vehicle expense. You do not have to track every vehicle expense. Rather, you only need to record the business mileage in the tax year. Then the mileage allowance rate (MAR) is applied to get your tax relief.
However, whether you will use the actual vehicle expense method or the simplified expense method, the following are important:
Update your records or logs – Make sure that you keep all the records of your business mileage accurately. This includes the mileage log that shows the time and places travelled to, and the miles covered.
Keep an accurate record of your receipts – Receipts are important to support your claimed business expenditure, so keep them properly.
Do thorough calculations – Make sure that you accurately calculate your business mileage and the mileage allowance relief that you are due.
How Do I Submit A Mileage Claim?
There are generally three ways to claim a mileage allowance relief – online, post, and phone.
Claim online – You’ll need to fill out the online self-assessment form. You simply need to include all the expenses for the tax year that you want to claim.
Claiming the tax relief online comes with some benefits such as receiving a reference number for tracking the progress of your form, and being able to give information for multiple tax years and multiple jobs.
Claim by post – To claim the tax relief by post, you’ll need to use HMRC’s form P87 form. Fill out the form and submit it with a pay-me-back form and an explanation of benefits (EOB). The completed form (and other requirements) should be submitted to: Pay As You Earn and Self Assessment, HM Revenue and Customs, BX9 1AS.
Claim by phone – You can simply call the HMRC to claim your mileage allowance relief. However, you can only use the phone option only if you had claimed it in a previous year, and your total expenses are less than £1,000.
The telephone number to call is 0300 200 3300 or +44 135 535 9022 (when outside the UK). Know that you should have your National Insurance Number with you when you call.
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