Mileage rates and tax relief

If your employer asks you to use your own car or van to undertake a journey on their behalf, you may be entitled to a payment from your employer to cover your petrol and wear and tear costs.

Let’s say that your employer pays you 35p per mile. You may feel that this is an adequate sum to cover your costs, and indeed this may be so, however, HMRC would have a different opinion.

HMRC would allow you to receive up to 45p per mile tax-free for the first 10,000 business miles you drove in your own car on behalf of your employer, and thereafter at 25p per mile. The clock resets to zero at the beginning of each tax year (6 April).

Additionally, if you take a passenger (a co-worker) on a business trip, you can claim 5p per mile.

What happens if you are paid at different mileage rates?

If you are paid at rates per mile greater than HMRC’s 45p (25p) rates, then any excess over these rates will be taxed as a benefit.

If you are paid less than HMRC’s approved rates, you can claim the difference as an expense on your tax return. For example, if your employer pays you 35p per mile and you claimed for 8000 business miles in 2018-19, you will have received £2,800 (8,000 x 35p) in expenses. HMRC would allow you 8,000 miles at 45p, £3,600, and would allow you claim the difference £800 (£3,600-£2,800) on your tax return for 2018-19. If you don’t submit a tax return you should call HMRC with the details to register your claim.

What if I use my motorcycle or bicycle?

The same principles apply but the rates of mileage are different. They are currently:

 

Motorcycles

24p

Bicycles

20p

 

In both cases the above rates apply whatever your annual mileage.

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