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.
When your employer works out 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 gross taxable pay – i.e. the amount on which you are required to pay tax on. So, the lower your gross taxable pay, the less tax you pay. Mileage allowance refund works by reducing your taxable pay based the total number of business miles travelled 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 refund, you must claim it – it is never given automatically. Basically, if you haven’t claimed the correct allowable expenses, your taxable pay is too high, and you would have paid too much tax on it.
Business mileage is any mileage you incur in fulfilling the day to day duties of your job. It does not include travel from your home to your permanent place of work. For example, an electrician may be required to visit different construction sites in his own car, or a healthcare worker 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 you.
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 refund on the difference.
Basically, you can claim over 45p tax-free as a business mileage allowance if you use your own car for a business journey.
UK mileage rates can differ, however, HMRC advisory fuel rates state that in most circumstances you can claim business mileage at a rate of 45p per mile for the first 10,000 business miles in a year (this is an increase of 5p per mile since April 2011) and then 25p per mile thereafter. If your employer pays you back, but will only reimburse you at 35p per mile then you can claim the additional amount as a deduction from your total taxable income.
Mileage Allowance Relief can be calculated by multiplying your business mileage by the approved rates set. This will give you the amount on which you can claim tax relief amount, not the refund. You will usually receive 20% – 40% of the final amount back as a rebate depending on the rate of tax you pay.
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 2015, but not anything prior to that. You can claim even if you are no longer at the same employer.
We provide an easy and quick way for claiming your mileage allowance rebate. 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.