Claiming business mileage can feel like a complicated headache for employees and employers if they don’t have the benefit of an automated system.
There are tax implications related to travel expenses. Much of the responsibility for those sits with the employer, but as an employee it’s useful to know what the rules are and what you’re entitled to, not least to ensure you get the right reimbursement.
Not everyone realises they can claim mileage if they use their bicycle for work purposes, for example!
Employers need to set up systems to ensure proper documentation of mileage to demonstrate they are staying within the rules.
Mileage Allowance Payments
If you use your own vehicle for work purposes (or any vehicle not owned by the company) there is an ‘approved amount’ that you can be paid per mile that does not require any notification to HM Revenue and Customs (HMRC) and on which there will be no tax to pay.
Any amount above that per-mile approved limit must be reported by your employer and should be added to your pay to allow tax to be deducted from it.
For cars and vans, the ‘approved amount’ is higher for the first 10,000 work-related miles you travel. Mileage is also payable when you use your own motorcycle or bike.
Travel to and from work is not something you can claim for unless it’s a temporary place of work, such as a different office to your usual base, which is further away.
The Government occasionally changes the approved limits. The 2020 limits currently stand at:
|Type of vehicle||First 10,000 miles||Above 10,000 miles|
|Cars and vans||45p||25p|
If an employee travelled 12,000 miles in their car for work purposes in a tax year, the amount of travel expenses that could be paid, without any need for tax to be paid would be:
(10,000 miles x 45p = £4,500) plus (2,000 miles x 25p = £500) = A total of £5,000.
If your employer pays you less per mile than this amount you may be able to claim additional mileage allowance relief from the Government, but it is usually in an employer’s financial interests to pay the full rate. It’s worth discussing with your employer first if you have an issue.
If you have more than one job with two entirely different employers, it’s possible to claim at the higher rate for the initial 10,000 miles travelled for each employer.
So, for example, if you travel 10,000 miles in a car for one job and 10,000 for the other job in the same year, both sets of 10,000 miles can be claimed at the 45p rate.
If you travelled 15,000 miles in a car for one job and 2,000 for the other job, only a total of 12,000 miles could be claimed at the higher rate (10,000 miles for the first job and 2,000 for the second).
What the approved amount covers
The approved mileage allowance is intended to be a catch-all payment that covers various costs associated with the journey, including, but not limited to, fuel.
It also covers a contribution towards the other costs of running a vehicle such as road tax, MOTs, repairs, maintenance and servicing.
Using a company car
When using a company car you can claim tax relief on the money you’ve spent on fuel for business trips, but cannot claim a mileage rate to cover other expenses. You also cannot claim for any fuel used for personal trips.
There’s a Government tool to help you decide if you’re eligible to claim for work-related expenses.
What you need to do
As an employee it is vital that you track business mileage, recording the journeys you’ve done, the miles covered and you may need to keep fuel receipts (especially if you wish to claim for fuel used in a company car).
Your employer may have standard forms to complete and should be able to advise on the company’s system.
If you’re uncertain about what business travel expenses you can claim, it’s a good idea to talk to your employer first and if you need any further clarity, check with HMRC. A good place to start is: Claim tax relief for your job expenses.