Are you claiming the correct mileage allowance?

21st July 2014

Are you claiming the correct mileage allowance?

Business mileage is an important way to receive tax relief against your income, but it’s often overlooked. Whether you drive a company car, or use your own car on business you'll need to account for your fuel costs. For journeys such as client visits, or working from different offices from your main office you should be claiming mileage back from your employer or business. 

If your employer does not pay a mileage allowance, or pays less than the HMRC approved rates, you can claim a deduction for any deficit against your tax, and get a tax refund. 

If you use your own car, the allowance is set at a rate to cover many costs, not just fuel – costs such as insurance, road tax and general wear & tear. If you have a company car, the allowance is lower as it covers only the fuel costs. 

For your own car, for the first 10,000 business miles you complete in a tax year you can claim 45p per mile if you use a car or van, 24p for a motorcycles and 20p for a bicycle. If you complete over 10,000 miles in a car or van then the rate drops to 25p for miles completed over 10,001 miles. 

For a company car, the rate for all mileage varies from 9p to 24p, depending on the type of engine, and the current rates can be found at; http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm 

One thing to remember is that all business mileage must be recorded to support your claims, with information such as the date and the reason for the trip. If you use HMRC's approved mileage rates then there is no tax or NIC implications but if you receive a rate higher than that then you may be liable to tax on the amount above HMRC's rate. 

Mileage claims can be claimed by employees, contractors and sole traders. But you must remember that travel to a permanent place of work does not qualify. 

There is even an element of VAT which a Vat-registered business can reclaim on mileage; the calculation is based on the size and fuel type of the vehicle in question. There are various advisory fuel rates on HMRC’s website which you can use to calculate VAT reclaimable, and if you require any advice please don't hesitate to contact us.  

Written by Emma Hardwick, Senior Accountant

 

 

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