TAXMAN PAYS YOU TO
RUN YOUR CAR!
If you drive for work in your own car you may be able to get some tax relief on the cost. Under HMRC rules your employer can pay you up to 45p a mile for the first 10,000 miles for the use of your own car. For mileage above 10,000 the rate is 25p. If you get paid up to that amount from your employer there is no tax due on it.
But if your employer pays you less than that – and many do – you can then claim tax relief yourself on the balance.
Here’s an example. Tracy drives 2,500 miles a year in her own car for her job as a safety supervisor on building projects. The mileage excludes travel to and from home to her main place of work. But in includes all the miles she does travelling round the project sites and back to her office. Her employer pays her 35p a mile so she gets £875 a year towards your motoring costs. Her tax code is adjusted so she pays no tax on that £875.
But under HMRC rules Tracy could be paid up to 45p a mile or £1,125 tax free. That is £250 more than she gets. So Tracy can claim the balance of £250 as a taxable expense and get tax relief on it. That is worth £50 to a basic rate taxpayer and, in Tracy’s case, £100 as she pays tax at 40%.
So if you drive your own car as part of your job and your employer pays you less than 45p a mile for the first 10,000 miles you can claim tax relief on the difference.
There are also maximum rates of 24p a mile for motorcycles and 20p a mile for bicycles. If you use your own vehicle for business use and you are paid less than those rates, you can get tax relief on the balance.
The claim normally has to be made after the end of the tax year when the mileage was done. Before that you will not know how many miles you have driven or what you are owed. You can claim by contacting HMRC. If the amount is more than £1000 then you will have to fill in a form P87. In subsequent years you can claim expenses under £1000 by phone. If they are more you will need to fill in form P87 each year. If you have claims from previous years you can go back to 2008/09 – but before April 2011 the maximum mileage rate was 40p. You will need to fill in a form P87 for each year claimed.
If you are claiming more than £2,500 then HMRC would normally put you into self-assessment and you would have to fill in a self-assessment form each year.
Download P87 www.hmrc.gov.uk/forms/p87.pdf Call the HMRC taxes helpline on 0845 300 0627 or
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