Do you use your car for work-related trips and pay some of the costs out of your own pocket? If so, HMRC lets you claim mileage tax relief. Here's what you should know.
Mileage tax relief allows you to deduct the cost of business-related journeys from your salary or overall income. This means you’ll pay less tax to HMRC.
How much mileage can I deduct?
To find out how much you can deduct:
- Make a note of the mileage when you travel for work.
- Alternatively, use an app like MileIQ. This logs your business mileage automatically and keeps a digital record you can refer to come tax time.
- Multiply your total business mileage by the applicable approved mileage allowance payment, or AMAP.
- Deduct the resulting amount from your tax bill.
The HMRC sets the AMAP rates and it can change over time. In the 2017 / 18 tax year, these are:
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What are HMRC’s rules on mileage tax relief?
HMRC lets you claim mileage tax relief both if you’re employed or self-employed. You can only claim it if you're:
- On business-related journeys
- Using your personal vehicle, not a company car
What is a business-related journey?
For HMRC to consider your trips business-related, they must be necessary for your work. In other words, each trip must satisfy one of two tests:
- You can’t do your work unless you make the trip, for example, because you’re a taxi driver
- You have to be someplace other than your usual workplace in order to do your job
These trips include:
- Travelling to and from client meetings
- Running errands — visiting the bank or buying office supplies, for instance
- Travelling between different workplaces, for example from one office to another
Does commuting count towards my mileage allowance?
Unfortunately, traveling to and from your normal workplace doesn’t count as business-related travel. And you cannot turn a commute into a business-related journey by stopping to do a business-related task on the way, either.
Traveling to a temporary workplace does count towards your mileage allowance. HMRC considers a workplace temporary if:
- You’ll work there for less than 24 hours
- You’re there for less than 40 percent of your time
What if my employer pays part of my mileage costs?
You may still be able to claim mileage tax relief from HMRC, even if your employer pays part of your mileage costs.
Here’s how to find out if you can claim:
- Multiply your yearly business mileage by the applicable AMAP rate
- Compare the result to the mileage allowance your employer pays you
- If the AMAP rate is higher than what your employer pays you, you can claim mileage tax relief on the difference
Here’s an example of how this works:
You’ve made 8,000 business-related miles in your private car in 2018. So, according to the latest AMAP rates, you can claim £3,600 (8000 x 45p).
Your employer pays you 20p per mile. Which means you got back £1,600.
In this case, the AMAP rate is higher than what your employer paid you. So, you can claim mileage tax relief from HMRC on the difference, that is £2,000 (3600 - 1600).
How do I claim mileage tax relief from HMRC?
Mileage tax relief isn’t automatic. You have to file a claim with HMRC. You have up to four years from the end of the tax year to claim it.
Here’s how to do this in five easy steps:
- Keep a record of your business mileage.
- Find out how much you can claim: Multiply your yearly mileage by the applicable AMAP rate. Deduct your employer’s mileage allowance, if any.
- For amounts under £2,500, file your claim: On your self-assessment tax return. Or, if you don’t file a self-assessment tax return, use a P87 form.
- If your claim is over £2,500, you must file a self-assessment tax return.
- Make sure your return or P87 form reaches HMRC: By the 31 October if you file by post. Your deadline to file online is 31 January if you file online.
