How you go about claiming business mileage tax relief really depends on how much relief you are looking to claim for. It is important to note here that the tax relief being claimed and a tax refund are two completely different things. Here is a quick note on each to hopefully help you understand the process of claiming your mileage allowance tax relief a little easier.
Tax relief is a deduction from the total income that you received from your employer. For example, if you earned £25,000 from your employer and had traveled 5,000 miles for work, then your mileage tax relief would work out to be £2,250 (5,000 miles at 0.45p per mile). This would reduce your taxable income to £22,750 which would result in a tax refund.
The tax relief available for the mileage tax allowance is as follows;
£0.45p per mile for the first 10,000 miles
0.25p per mile for anything over 10,000 miles
More on these amounts and for different types of vehicles can be found on the .Gov website.
A tax refund is the actual monies that you would receive back from expense claims such as mileage tax relief. Using the above example; if you earned £25,000 then the amount of tax that you would have paid would be £2,486. If you applied for mileage tax relief of £2,250 then your taxable income would be reduced to £22,750 meaning that you would have overpaid tax for the year. This would result in a tax refund of £436.00; effectively 20% of the tax relief being applied for assuming that you were a basic rate taxpayer.
How do I actually make a claim for the Mileage Tax relief?
As mentioned earlier how you go about making a claim for mileage tax relief all depends on the amount of tax relief that you are applying for. For tax relief of under £2,500, then you would simply claim for this using a form called a P87.
If you are claiming tax relief of over £2,500, then it does get a little bit more complex as you will need to complete a tax return. If you have never completed a tax return before then these are the steps that would need to be followed to do so.
- Applying for a Unique Tax Reference number or UTR. This will need to be applied for directly from HMRC and can be done so on the HMRC website.
- Pull together all of your tax documents. These could be P45s, P60s, or Payslips, etc. If you are self-employed then you will need to pull through your remittance advice, invoices and any cash received.
- Your mileage log. HMRC will not accept claims that are estimated or rounded figures. Because of this, you should always keep a mileage log in case HMRC investigates your claim.
- Calculate your mileage tax relief and include this on the tax return.
- Submit the tax return to HMRC. Assuming that they do not need anything extra from you then your refund should be paid out within 7 working days.
What mileage am I allowed to claim for?
Well, this is the tricky bit. There are a fair few rules and regulations around mileage tax refund claims so it is always best to speak to an accountant about making a claim to ensure that you are not unwittingly committing fraud. If HMRC deems your mileage claim to be fraudulent then the penalties can be severe. Shoebox’s Mileage Tax Refund service is all about keeping you on the straight and narrow and of course maximising your tax refund. We only submit claims once they have passed our rigorous compliance process. To get in touch to discuss your mileage claim complete the mileage refund calculator on our Mileage Tax Refund page and one of our refund managers will be in touch.