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:
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.