Sign up for our newsletter
Interested in receiving the latest tax planning ideas?
Sign up to Tax Bites – our weekly update offering practical but effective tax saving tips.
12th November 2014
Posted in Articles, Business Tax, Employment Tax, Featured Articles, Private Client by Forbes Dawson
Taxpayers who use their own vehicle for travel on their employer’s business often miss out on valuable tax reliefs if they are paid low mileage rates.
The relief is quite straight forward, provided the employee has kept records of his business mileage in the year and a record of all reimbursement payments made to him by the employer. To work out how much allowance can be claimed, the business mileage is multiplied by the “approved mileage rates” as follows:
The employee can claim tax relief on the difference between these rates and the amount that he actually receives.
As it is common for employers to agree to reimburse their employees for their mileage on company business, but only at a rate designed to cover the costs of fuel, there is often scope for an employee to claim tax back. It is surprising how often we see this being overlooked!
The example below illustrates just how much tax can be saved by simply making the claim, either with the annual self-assessment tax return, or for those who don’t need to complete a tax return, by making a claim to HMRC in writing.
Example
Robin, who received a salary of £70,000 per annum in 2013/14, has worked for his employer since April 2011. His duties require him to regularly attend other company sites and the offices of several key suppliers. The total mileage in his car (2.5 ltr diesel Volvo) for the 2013/14 tax year was 35,000, of which 29,600 was business mileage. The levels of mileage were similar in previous tax years. His employer has reimbursed him for business fuel only at the rate of 17p per mile. As this is below the approved rates, Robin can claim a deduction from his taxable income as follows:
| HMRC approved rates |
£ |
| 10,000 miles at £0.45 |
4,500 |
| 19,600 miles at £0.25 |
4,900 |
| Deduction available |
9,400 |
| Less fuel costs paid by employer at 17p per mile (29,600 x £0.17) |
(5,032) |
| Mileage claim available |
4,368 |
Interested in receiving the latest tax planning ideas?
Sign up to Tax Bites – our weekly update offering practical but effective tax saving tips.
You can use this form to request us to give you a call or if you prefer just leave us a message. Please be sure to leave us a contact number or email address for you and we will get back to you as soon as we can.
