Nine Things You Need To Know About Tax Relief For Mileage

Do you use your own vehicle for business purposes?

If so, you may be able to claim tax relief on your business mileage.  Our guide explains what and how you can claim.

1. You can claim tax relief for mileage

If you use your own vehicle for work, it is possible to claim tax relief on the miles that you travel.  It is called ‘mileage allowance relief’ and allows you to benefit from tax relief on using your own transport for business purposes.

2. You can only claim tax relief for certain types of business mileage

The definition of ‘business mileage’ is quite strict.  Broadly speaking, it is ‘mileage you travel when doing your job’ but it does not include:

  • Private travel
  • Travel between home and your permanent workplace

3. Tax relief for mileage isn’t just for car travel

You can claim tax relief if you use any of the following modes of transport for your business mileage:

  • Car
  • Van
  • Motorcycle
  • Cycle

4. How to work out your business mileage

Firstly, you should up your business miles travelled in the tax year.  If you use different forms of transport, you should work out your car, van, motorcycle and bicycle miles separately.

You then need to find the ‘approved mileage rates’ from the HMRC website.  As of 2010, the rates are:

  • Car – 40p/mile for first 10,000 miles then 25p/mile thereafter
  • Motorcycle – 24p/mile
  • Bicycle 20p/mile

You then multiply your business miles by the approved mileage rate to work out the total ‘approved amount’.

5. Check what expenses you have already been paid

Once you have worked out your total ‘approved amount’, you then need to establish what expenses you have already been paid by your employer for this mileage.  If your employer has paid you less than the ‘approved amount’, you are entitled to mileage allowance relief on the difference.  Some employers, for example, may pay no mileage allowance at all.

6. You may be liable for tax on your business mileage

However, if your employer has paid you expenses that exceed your ‘approved amount’, you may be liable to pay tax on the difference.

7. Keep records of your business travel

Your employer and HMRC will need records of your work journeys to pay expenses and to calculate your tax relief.  Make sure you keep records of dates, mileage and details of all work journeys.

8. Claiming mileage allowance relief

The form P87 is the one most commonly used for claiming tax relief on business mileage.

HMRC will send you form P87 if:

  • You request one
  • It is the first time you have claimed this tax relief
  • You are claiming for expenses for a year before the previous tax year
  • You claim expenses over £1,000

If you have claimed these expenses before and your claim is for a low amount, you may be able to claim by letter or telephone.

9. How your tax relief is paid

If your claim for mileage allowance relief is £2,500 or less, HMRC normally gives you relief for your expenses through your tax code straight away.

If your expenses claim is for more than £2,500, HMRC will give you relief in your tax code for the current year and for the next one – and send you a tax return to fill in.

8 comments

  1. James Lafferty says:

    When I get some money back for claiming on mileage relief is that taxed,if so how much by

  2. Les Battey says:

    Can I get tax relief for parking charges for parking at my work ? I pay £5 per week.

  3. Chris says:

    Hello,
    My employer pays me a monthly car allowance of

  4. Brian says:

    I have been granted a revised tax code through claiming business milage. My particular problem occurs due to the fact that I work for an agency.
    The agency work is quite infrequent at the moment, so my earnings at present haven’t required having tax deducted so far in 2011.
    What possible benefit can I achieve from being awarded the extra tax code when I haven’t an iota’s chance of earning enough money per week?

  5. Guy Oliver says:

    Since joining my current company in Oct 2006,I have carried out a vast amount of business miles.
    The total is in the region of 80 to 90,000 miles.
    I have been issued with fuel by the company,but my own car has been used consistently.I understand the calculations from mileahge records etc,but I wish to know if there is a limit on how far back i can claim for .e.g. the last four years?

  6. Dave Brown says:

    Hello

    I am a self employed electrician. In the last year I have worked on various sites in the north west. My wages are paid through an agency and they deduct 20% CIS. I have not remained on any individual site for more than 6 months. Also one of the sites was in Manchester city centre where I had to pay £5/day for car parking. Can I claim tax refief on car mileage from home to the various different sites? Can I claim for parking and also can I claim for telephone calls or phone rental?

    Thanks, Regards

    Dave Brown

    • TaxFix says:

      Dave Brown: If you are on CIS you should be completing a CIS tax return. When you complete the CIS tax return you can deduct any allowable expenses against your claim and get a refund on them. If you need help completing your CIS tax return, we offer a service which you can read more about here.

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