If you’re using your own vehicle for work, you may be able to claim mileage expenses from your employer. Some employers will pay you the full HMRC mileage allowance (there’s more on this in our recent blog post ) while others may only pay you part, or none, of the available allowance.
If your employer doesn’t pay you the full mileage allowance (called approved mileage allowance), you may be able to claim Mileage Allowance Relief. If you’re a taxpayer, this helps you to claim tax relief when your approved mileage allowance has not been fully used.
In this post, we’ll explain how the Mileage Allowance relief works, and the steps you’ll need to take to apply for this useful tax relief.
- What is Mileage Allowance Relief?
- How to calculate Mileage Allowance Relief
- How to make a claim for Mileage Allowance Relief
- What mileage records will you need to keep?
- The value in making a Mileage Allowance Relief claim
- Where can I find out more information?
What is Mileage Allowance Relief?
Mileage Allowance Relief (MAR) is a tax relief that allows you to pay less tax, based on how much your employer has paid you when reimbursing you for your work-related mileage. It’s also sometimes known as Mileage Relief or Mileage Tax Relief.
The relief calculation is based on:
- your business mileage
- and the HMRC approved mileage allowance payment (AMAP) rates.
This all sounds good so far – who wouldn’t want to reduce their tax bill, after all? But what exactly do we mean by business journeys? And what are the AMAP rates?
Let’s explain these technical details:
- What does HMRC mean by ‘business journeys’? A business journey is classed as any journey you take for work which isn’t your normal day-to-day commute. As such, the travel from your house to your normal place of work is NOT a business journey. But a journey to a client’s office, to a training centre or to a work-related conference IS classed as a business journey
- What are the AMAP rates? The approved mileage allowance payment (AMAP) rates are set by HMRC and give employers a guideline for mileage rates when reimbursing employees for business mileage. The rates are different depending on the type of vehicle you use, whether it’s a car/van, a motorcycle or a bicycle. There are also two different rates when using a car/van, based on the number of miles travelled. The first 10,000 miles of travel, per tax year, are paid at a higher rate (45p), and anything over 10,000 miles is paid at a lower rate (25p). Rates for motorcycles and bikes remain the same, regardless of the number of miles travelled.
The current AMAP rates are:
Type of vehicle First 10,000 miles Above 10,000 mile
Cars and vans 45p 25p
Motorcycles 24p 24p
Bicycles 20p 20p
How to calculate Mileage Allowance Relief
To work out what you’re due under the Mileage Allowance Relief rules, you need to know:
- Your total business mileage
- The AMAP rates (shown above)
- The amount your employer has reimbursed you for your mileage (if any) and the rate paid at
- Your personal tax rate
The process looks like this:
- Calculate your total business mileage for the year.
- Times this number by the AMAP rate for the relevant vehicle to get your total mileage allowance relief – 45p for cars/vans for the first 10,000 miles (25p for anything over 10,000 miles), 24p for motorcycles and 20p for bikes.
- NOTE: If your employer has paid SOME of your mileage expenses, you will need to reduce the standard AMAP rate to reflect the rate you have previously been paid at. For example; if your employer pays you for car mileage at 20p per mile, just subtract this from the standard 45p per mile rate (for the first 10,000 miles) to make the rate you use for your calculation 25p per mile – this will reduce your total mileage allowance relief number in line with the mileage expenses you’ve already been paid.
- Calculate the relief available to you, based on the current rate for your income tax band – 20% for basic rate, 40% for higher rate and 45% for the additional rate.
Let’s see how this works in a practical example…
Example 1: Car travel 10,000 miles or under, with reimbursement
- Hassan uses his car for work and racks up 10,000 miles of business travel in the year.
- Hassan’s employer pays him some mileage expenses, at a rate of 25p per mile. Because of this, we need to lower the AMAP rate for cars/vans from 45p to 20p (45p – 25p = 20p). This lower rate will now be used in the calculation to factor in the mileage expenses that Hassan has already been paid.
- 10,000 x 20p = £2,000 total mileage allowance relief.
- Hassan pays basic rate income tax. This means he’s entitled to 20% of £2,000, which comes to £400 – that’s £400 of total tax relief.
Example 2: Car travel over 10,000 miles, with no reimbursement
- Antoinette uses her car frequently for long business trips. Her employer doesn’t reimburse her for this mileage. Her total mileage comes to 25,000 miles of business travel. Because some of this mileage falls over the 10,000 mile cut-off for the higher rate, we have two calculations to make.
- 10,000 x 45 = £4,500 sub-total of mileage allowance relief at the higher rate of 45p.
- 15,000 x 25p = £3,750 = sub-total of mileage allowance relief at the lower rate of 25p.
- £4,500 + £3,750 = £8,250 total mileage allowance relief.
- Antoinette pays basic rate income tax. This means she is entitled to 20% of £8,250, which comes to which comes to £1,650 – that’s £1,650 of total tax relief.
Example 3. Motorcycle travel, having been paid at 10p per mile
- Maria uses her motorcycle for travelling to clients. Her total business mileage for the year comes to 2,000 miles.
- Maria’s employer pays her some mileage, at a rate of 10p per mile. As such, we need to lower the AMAP rate for motorcycles from 24p to 14p (24p – 10p = 14p). This lower rate will now be used in the calculation to factor in the mileage expenses Maria has already been paid.
- 2,000 x 14p = £280 total mileage allowance relief
- Maria pays higher rate income tax. This means she’s entitled to 40% of £280, which comes to £112 – that’s £112 of total tax relief.
Example 4. Bike travel, with no reimbursement
- Declan uses his pedal bike for travelling to client meetings. His total business mileage for the year comes to 5,000 miles. His employer doesn’t reimburse him for this mileage.
- Mileage when using a bike is paid at 20p per mile.
- 5,000 x 20p = £1,000 total mileage allowance relief
- Declan pays additional rate income tax. This means he’s entitled to 45% of £1,000, which comes to £450– that’s £450 of total tax relief.
How to make a claim for Mileage Allowance Relief
To claim Mileage Allowance Relief as an employee, you’ll need to either fill out your usual annual self-assessment tax return, or complete form P87. The P87 form allows you to claim income tax relief against your employment expenses, including business mileage.
You’ll need to deal directly with HMRC, or engage a tax agent to act on your behalf. There are three different ways to make the claim via form P87.
You can claim:
The size of your Mileage Allowance Relief claim will define which method you must use, with smaller claims offering more options.
- For claims up to £2,500 – use a self-assessment tax return, P87 form or make a claim over the phone. NOTE: You can only claim by phone if you’ve already claimed expenses in a previous year and your total expenses are less than either £1,000 (in general) or £2,500 for professional fees and subscriptions.
- For claims over £2,500 – use a self-assessment form.
What mileage records will you need to keep?
To make your claim, whether it’s online, by post or by phone, you’ll need to have the relevant records of your business mileage to hand.
HMRC will expect you to hold detailed records of your business mileage, including:
- The start and end location of each journey
- The distance travelled between these two locations (HMRC is keen to check the distances, so will need this information)
- The business reason for this journey
- The total amount of mileage allowance payments you’ve received
How you keep these records is up to you. Traditionally, your mileage records are likely to be hastily scribbled paper notes, or a simple Excel spreadsheet for the more tech-savvy. But with HMRC gradually moving all it’s services over to digital (as part of it’s ongoing Making Tax Digital initiative) it’s advisable to keep a digital record.
A mileage app, such as Tripcatcher, makes it easier to log your business mileage while out on the road, in the office or anywhere. Tripcatcher also provides you with a detailed digital record, that can easily be downloaded and shared with HMRC when making a claim for Mileage Allowance relief – records can be published to your printer, Excel, PDF, Xero online accounting or Dext Prepare (previously called Receipt Bank).
The value in making a Mileage Allowance Relief claim
As with most HMRC reliefs, making a Mileage Allowance Relief claim isn’t the easiest thing to do. It will take time, and you will need to make sure you have all the relevant records and tax information to hand. But claiming this relief is an effective way to reduce your tax bill and bring more money home.
This is especially important if you’re in a job where you carry out a lot of business mileage – for example, you might be a district nurse who uses their own car to drive from patient to patient each day but who doesn’t get fully reimbursed for these miles.
Where can I find out more information?
If you already have an accountant or tax adviser, it’s well worth talking to them about your business mileage and the best ways to claim this relief. However, it’s still possible to make a claim as an individual, without having a tax agent.