Most people are aware that you can claim a mileage allowance when using your own car for business purposes.
For Business Owners
The approved mileage allowance for cars is 45p per mile for the first 10,000 miles and 25p per mile thereafter. But did you know that you can also claim an additional 5p per mile for each passenger travelling with you for business?
If you use the approved mileage allowance then there is no need to complete these details on the P11D at the end of the year.
Also, the approved mileage allowance doesn’t just apply to those claiming for their own business but also applies to employees.
An example, if your employer only pays you 30p per mile for business, the approved amount is higher so you’re entitled to Mileage Allowance Relief on the difference.
For example: if you use your own car for 900 business miles and your employer pays you 30p per mile. The approved amount is £405 (900 x 45p). The allowance you get from your employer is £270 (900 x 30p). Your Mileage Allowance Relief is £135 (£405 less £270).
The Mileage Allowance Relief will reduce the amount of income you pay tax on, so your tax bill will reduce by £135 at 20% (if you’re a basic rate taxpayer) or at 40% (if you’re a higher rate taxpayer) and at 45% (if you’re an additional rate taxpayer)
You are only entitled to Mileage Allowance Relief if your employer pays you:
- no mileage allowance
- less than the approved amount. If your employer pays you more than the approved amount, you’ll have to pay tax on the extra.
The mileage allowance also applies to motorcycles and bicycles
For a motorcycle you can claim 24p per mile and there is no upper limit as with cars.
For a bicycle you can claim 20p per mile.
What records you must keep?
You need to keep records of dates, mileage and details of all work journeys. Your employer needs this information to make expenses payments to you. You also need them to get any Mileage Allowance Relief.
If you use different vehicles
If you use more than one vehicle of the same kind add all your business miles together in one calculation.
If you use vehicles of different kinds make separate calculations for each one.