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Business Mileage - Tax Allowance

Hi,

Not too sure if this is the correct group but couldn't find anything more appropriate, please direct me if there is.

I'm trying to settle a debate with a friend/colleague regarding claiming tax relief on business travel undertaken in a personal car. We both work as employed travelling salesmen on a PAYE system, not self employed as is common in our industry. Our employer pays us a mileage allowance of 24p/mile to cover petrol, maintenance and the additional insurance costs required for commercial travelling.

AIUI The Inland Revenue will allow employers to give tax free expenses of up to 40p/mile for 10,000 miles/year. My friend has been lead to believe by the IR that he can claim an additional 16p/mile as tax relief which would bring him up to the 40p threshold. He was told by the IR that the 16p difference would be reimbursed in full for every business mile travelled.

I believe that it is possible to claim tax relief on the 16p difference but ONLY approx 20% of the full amount (i.e. it is possible to claim back the income tax paid on earnings which are then spent on tax free expenses). Who is correct? I find it difficult to believe that the IR would give the full 16p back but I have trouble understanding the literature published on this matter.

Could anybody please clarify who, if either of us, is correct.

Thanks for taking the time to read.

Regards, Tom

Reply to
Tom
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Correct.

You are right. You claim the 16p (times business miles) on your tax return, which is then deducted from your gross income for tax purposes. Thus you actually get tax relief on the 16p at your top rate (presumably 22% or 40%).

So if you did 7,000 business miles in the tax year, you'll get a tax refund of 7000 x 16p x 22% = £246.

Above 10k miles in the year, the rate drops to 25p (on the excess) so you can claim 1p / mile, hence 1p x 22% tax refund.

Reply to
Martin

Fantastic Martin, thanks for your help. Seems unfortunately I'm right but it did seem a little strange that the IR advised otherwise. Not too surprising with the way government bodies are now.

Still, I guess it'll knock a few hundred off my tax for the year so I can't complain there.

Thanks again, Tom

Reply to
Tom

Are you sure they advised that? Sometimes the question is not explained well and sometimes the answer! In other cases HMRC do indeed get it wrong.

Reply to
Peter Saxton

I cannot be 100% certain as it was my friend who was advised on this issue. Perhaps he explained the circumstances incorrectly. Or misinterpereted the answer.

I suspect he was just overexcited at the prospect of getting back a decent sum (we do about 10,000 miles/year each) and was confused by the IR's policy. Still tax relief at 10,000 miles is still worth claiming if possible.

Regards, Tom

Reply to
Tom

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