Do you use your own car for work journeys?
If you do, you are eligible to be paid an allowance by your employer to cover any costs that you incur. And, as long as you comply with certain rules, these payments can be made to you free of fax and National Insurance Contributions (NICs).
Are there any rules I have to follow to receive tax-free payments?
Yes. There are three rules that you must comply with in order to receive a car petrol tax refund free of tax:
- The payments must be within the set limit that is fixed by law
- The payments must be made to you directly (and not to someone else on your behalf)
- The payments must be in relation to expenses you have incurred for using your own vehicle for work journeys
The rules for receiving payments without National Insurance Deductions deducted are slightly different, and your employer is responsible for working out what you can claim.
You can claim these tax expenses for using any vehicle in relation to your work, including a car, van, motorcycle or bicycle.
What constitutes a ‘work journey’?
Any journey that you have to make as part of your work is considered a ‘work journey’. For example, if you have to visit clients at their homes or make deliveries using your own vehicle, these would generally be considered ‘work journeys’.
Your normal ‘commute’ – i.e. your journey to and from your normal place of work every day – is not considered a ‘work journey’ for tax expenses purposes.
What level of tax expenses can I claim?
The amount of car petrol tax refund that you can claim depends on what vehicle you use. HMRC publish a list of set ‘mileage rates’ for the different modes of transport – cars, vans, motorcycles and bicycles. You can claim the number of miles you have travelled on ‘work journeys’ multiplied by the set mileage rate for the vehicle that you used.
Bear in mind that there is a maximum amount of tax relief that you are able to claim in one year, even if your travel expenses exceed this amount. Details can be found via HMRC.
If your employer already pays you expenses which are above the fixed HMRC rate, any excess is taxable as income. Similarly, if your employer pays you a lower mileage rate than the set HMRC figure, you can claim Mileage Allowance Relief by using form P87 or writing to HMRC.
Do I need to keep any records?
Yes. It is important that you keep good records of any business mileage that you have undertaken. HMRC may need it if you wish to claim Mileage Allowance Relief and your employer will also need to see the records to determine the level of expenses payments that are due.