Do you use your own car, van, motorcycle or cycle for work journeys?
If so, you are eligible to be paid an allowance by your employer to cover any costs 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).
There are three rules that you must comply with in order to receive these expenses payments free of tax:
- 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 payments must be within a set limit, fixed by law
The rules for receiving payments without NICs deducted are slightly different, and your employer is responsible for working out what you can claim.
What is a ‘work journey’?
Any journey that you have to make as part of your work is considered a work journey. Examples would include making deliveries to customers and visiting clients at their homes.
Your normal ‘commute’ – i.e. your journey to and from your normal place of work every day – is not considered a ‘work journey’ for expenses purposes.
How much can I claim?
The amount that you can claim depends on what vehicle you use – whether it is a car or van, cycle or motorcycle. HMRC publish a list of set ‘mileage rates’ for each of these three vehicles and you can therefore claim the number of miles you have travelled on ‘work journeys’ by the set mileage rate for the vehicle you have used.
You should be aware, however, that there is a maximum tax relief amount 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 an amount 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.
It is important that you keep good records of any business mileage that you have undertaken. Your employer will need to see the records to determine the level of expenses payments, and HMRC may need it if you wish to claim Mileage Allowance Relief.