Car driving by Big Ben and the Houses of Parliament in Westminster, London

Who is eligible to claim mileage allowance?

June 28, 2021

If you regularly hit the road for work, whether it's travelling to client meetings, delivering goods or heading to a conference, then the cost of maintaining the vehicle that gets you there can start to creep up. Every mile added to your car causes wear and tear, driving up your next service cost, plus there's the fuel to think about.

It's a pain that your wallet could do without, but did you know that if you use your personal vehicle for work, you could be eligible to claim Mileage Allowance relief?

This is great news for anyone that has to travel for their work, but it can leave plenty of people confused about whether or not you can claim a Mileage Allowance. It all depends on the type of journey you make, and you don't want to submit a Self Assessment form until you have all the relevant information.

In this article, we'll go into detail about just what Mileage Allowance is, who is eligible for it and how to go about claiming this tax relief. If you've ever found yourself scratching your head and wondering whether you could be claiming money back for all those miles driven, then this is the article for you.

Who is eligible to claim Mileage Allowance?

Mileage Allowance can be claimed by any individual who uses their private or personal vehicle for business purposes. This includes employees, sole traders, people who are self-employed and business owners. You can claim Mileage Allowance whether you drive a car, van, motorcycle or even a bicycle, as long as it's your own vehicle.

There are also some circumstances where you can claim tax relief when using a company car, which we'll go into later. Unfortunately, you can't claim Mileage Allowance for normal travel to and from your place of work – sorry commuters! However, if it's a temporary place of work, or somewhere that isn't your usual office space, then you may be able to claim.

Before you get started with your next Mileage Allowance claim, you'll need to know the current rates, as well as the different requirements and vital information whether you're a business owner, sole trader or an employee. Let's take a look.

UK car Mileage Allowance rates for 2021

If you use your own vehicle for a business trip, you can submit a claim for tax relief for your trip. This Mileage Allowance helps you cover costs for things like your car's MOT, repairs, fuel, road tax and electricity for electric vehicles. However, if you do claim for Mileage Allowance this means that you then can't claim separately for these things.

These are the currently approved mileage rates:

First 10,000 business miles in the tax year Each business mile over 10,000 in the next tax year
Cars and vans 45p 25p
Motorcycles 24p 24p
Bicycles 20p 20p

(Source: Gov.uk)

If you decide to claim Mileage Allowance, then it's wise to keep detailed records of all your journeys so that you have all the information available when you come to submit your Self Assessment form. We'll run you through everything you need to log and exactly how to claim this tax relief as well as what to do if you're a business owner with employees who want to claim.

Mileage Allowance Payments

If you're a business owner, you can pay Mileage Allowance Payments (MAPs) to your employees when they use their car for business purposes.

Luckily, it's pretty simple to pay your employees' Mileage Allowance Payments, and in some cases, you don't even have to deal with HMRC, which is a bonus. It's also really easy to work out what you or your employees should claim using the approved mileage rates.

Mileage Allowance: what employers need to know

If you own a business where your employees need to travel for their work and use their own vehicles, then they may come to you and ask to be reimbursed for their journeys using Mileage Payments Allowance.

You can pay your employees a certain amount of MAPs each year. As long as you stick to the "approved amount" then you don't need to report them to the HMRC. If you do go over this amount, then the excess will be taxed and have to be reported.

To work out the approved amount, let's take a look again at the mileage rates and some examples.

First 10,000 business miles in the tax year Each business mile over 10,000 in the tax year
Cars and vans 45p 25p
Motorcycles 24p 24p
Bicycles 20p 20p

(Source: Gov.uk)

You can use the simple formula Business Travel Miles X The Rate Per Mile For Their Vehicle = Vehicle Business Mileage Expense Claim to work out the below examples.

Let's say you have an employee that drives their personal car to and from client meetings, and they rack up a total of 15,000 miles in that tax year. The approved amount would come to a total of £5,750. This is made up of the first 10,000 miles at 45p and the final 5,000 miles at 25p or (10,000 x 0.45) + (5,000 x 0.25).

However, you don't have to stick with these rates if you don't want to. Maybe you want to pay your employees a larger amount as a benefit. That's all fine, but anything over the approved amount will have to be reported to HMRC and be taxed accordingly. It's also liable to Class 1 National Insurance, so something for you and your employees to be aware of.

Let's take a look at another example. You have an employee that uses their personal car to get to a temporary office location and drive to conferences in their role working for your company. They drive a total of 3,000 miles in the tax year. As a business owner, you have decided that you want to pay your employees 50p per mile.

The approved amount for this employee is £1,350. But since you're paying 50p per mile, their mileage payments come to £1,500. This means that the amount that is taxable for this employee is £150.

As the employer, you are responsible for reporting this to the HMRC using a P11D form. If you get stuck or are confused about how much tax needs to be reported, you can use the P11D working sheet 6 on the Gov.uk site.

How to report and pay Mileage Allowance Payments

If you've stuck to the approved amount, then there's no need to report anything. If, however, you do decide to pay over the approved amount, then you will need to report this on a P11D form. This form covers expenses and benefits that you pay your employees, not just those related to Mileage Allowance.

Where you've gone over the approved amount, you'll also need to add the excess to your employees pay. From there, it will be subject to the normal tax rates.

The Mileage Allowance Payments will be paid directly to your employees, just like any other expenses. It doesn't go through PAYE unless you've gone over the approved amount. If you need to know more about what types of expenses you need to report and pay, the Government website has a handy list.

Mileage allowance: what individuals need to know

If you're an employee, a sole trader, contractor or a freelancer, then there are things you need to know about Mileage Allowance – from what counts as a business trip, to what records to keep, to what kind of travel falls under Mileage Allowance.

Are you still unsure about whether you as an individual can claim Mileage Allowance? Let's clear that up.

Claiming when you use your own vehicle for work

If you are using your own vehicle for business trips, then you may be eligible to claim Mileage Allowance. This allowance isn't only restricted to cars, you can claim for mileage allowance whether you drive a car or a van, or if you drive a motorbike or ride a bicycle. You can't claim Mileage Allowance for trips taken on public transport, and unfortunately, sole traders can't claim Mileage Allowance when travelling by bicycle.

It's up to you to be proactive and work out whether you are owed money. We've gone through some examples of what an employer can pay an employee, and the rules are similar for the self-employed. If you are self-employed then you are eligible to claim mileage from HMRC.

Before we go any further, we should be clear on what counts as a business trip. A journey can be considered a business trip if:

  • You're driving to a client's workplace.
  • You're travelling to a work event or conference.
  • You need to drive to a training session.
  • You have to drive for a sales meeting or meet a client or customer.
  • You're travelling to a temporary workplace, meaning you've worked there for less than 24 months.

It does NOT include commuting to your permanent office. A workplace is considered permanent if:

  • You've worked there for more than 40% of your total working time
  • AND you've worked there continuously for 24 months
  • OR you plan to work from this space for more than 24 months
  • OR you work there for all, or almost all, of the time you were an employee or director of your limited company at the same workplace.

You also can't claim any personal trips and errands, even if you make them during your working day. If you're at all unsure about what you can claim for, you can talk to our experts here at Ember.

If your employer pays you less than the approved amount, then you can claim tax relief for the rest. This is called Mileage Allowance Relief and is different to Mileage Allowance Payments, as you're not being reimbursed money for your driving expenses. Essentially, you are increasing the amount of income you're able to earn before you have to start paying income tax.

Let's take a look at an example using the mileage rates table again.

First 10,000 business miles in the tax year Each business mile over 10,000 in the tax year
Cars and vans 45p 25p
Motorcycles 24p 24p
Bicycles 20p 20p

Let's say that your employer only pays you 20p per mile for driving your personal car to and from business meetings instead of 45p. You can claim tax relief on the 25p shortfall.

In this example, you have driven 4,000 miles meeting clients at their offices. The approved rate would be £1,800 (at 45p for the first 10,000 miles, so 0.45 x 4,000). Your employer pays you £800 (20 x 4,000). This leaves a shortfall of £1,000, which you can claim tax relief on.

If you want to claim for things like parking charges, then this will need to be under a separate expense.

If you're self-employed, then the simplest way to claim back money spent on travelling for your work is to use the information in the tables above to claim a fixed rate Mileage Allowance.

How to claim Mileage Allowance Relief

If you want to claim Mileage Allowance Relief you will first need to work out how many business miles you have driven in that tax year. Next use the figures shown in the approved mileage rates table to work out your total Mileage Allowance Relief. You can then use this figure to calculate how much relief you're entitled to, depending on your current income tax band (20%, 40% or 45%).

To see how this might work, we'll use an example of a self-employed person who has travelled on a motorbike for 10,000 miles delivering items to their clients. The business mileage for this travel is £2,400 (0.24p x 10,000). If this person is in the basic rate tax band, then they're entitled to tax relief of 20% of that total of £2,400, which comes to £480.

If the amount you're claiming comes to less than £2,500, then you can claim using a P87 form. If it's more than £2,500, then you will need to claim using a Self-Assessment form, which we can help you with.

To make sure that your claims are accurate, you will need to keep detailed records of all your business journeys made in your personal vehicle. These records should include:

  • The dates of the journey
  • The start and end location of each journey
  • How many miles travelled
  • The reason for the journey

How far back can I make a claim?

You can make a claim as far back as four years.

Claiming tax relief on a company car

While you can claim Mileage Allowance for using your own car, van, motorbike or bicycle for business trips, there are different rules when it comes to company cars.

If you have a company car, then you can claim tax relief on money you spend on fuel and electricity when you use this vehicle for business trips. Employers can use Advisory fuel rates to reimburse their employees when they use their company car for business travel, and also for some private travel.

Summary

If you use your car, van, motorbike or bicycle for any kind of business trip, and haven't claimed Mileage Allowance yet, then you could be missing out on cash that could help you keep your vehicle on the road and in good condition. It's easy to do, but if you need help, we at Ember are always happy to lend you a helping hand.

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Daniel Hogan

Daniel is a Deloitte-trained, fully qualified Chartered Accountant with experience in the finance software space. It was during his tenure managing a finance system in the UK that he grew dissatisfied with the lack of synergy and automation in the space, compelling him to co-found Ember.