Can you claim mileage tax relief if your employer pays less than HMRC rates

Many workers are underpaid for mileage

Plenty of UK employees use their own car for work and get some mileage back from their employer. The problem is that many employers pay far less than HMRC’s approved rate. This means thousands of people are losing out on money they are entitled to reclaim through tax relief.

If you are paid below the HMRC mileage rate, you can usually claim back the difference. Over a year this can add up to hundreds of pounds.

What are the HMRC mileage rates

HMRC sets approved mileage allowance rates. These are the rates you can receive tax free from your employer for business travel in your own vehicle:

• 45p per mile for the first 10,000 miles in a tax year
• 25p per mile for any miles above 10,000

If your employer pays the full approved rate, you have nothing more to claim. If they pay less, you can claim tax relief on the shortfall.

Common shortfalls in mileage payments

Some NHS trusts pay as little as 25p per mile. Small firms sometimes offer 20p per mile. In both cases, workers are entitled to claim tax relief on the gap between what they received and the HMRC rate.

Example: If you drive 8,000 business miles in a year and your employer pays 25p per mile, you are being paid 20p short for every mile. That is £1,600 of mileage underpaid. At a 20 percent tax rate, you can reclaim £320.

Who is eligible to claim mileage relief

You may be able to claim if:

• You are a PAYE employee who uses your own car for work
• Your employer reimburses you at below HMRC’s approved rate
• Your journeys are to temporary workplaces, not normal commuting
• You have paid income tax in the year of the claim

How to claim mileage tax relief

• Work out how many business miles you drove
• Check how much you were paid per mile
• Calculate the difference compared to HMRC’s approved rate
• Submit a claim to HMRC using form P87 or Self Assessment
• Backdate claims for up to four tax years if you have not already claimed

You do not need fuel receipts but you should keep a simple mileage log to prove the journeys were for work.

Why use TaxBax

Claiming directly with HMRC can be time consuming. Many workers do not know where to start or give up at the paperwork. TaxBax makes it simple. We calculate your shortfall, prepare your claim and deal with HMRC on your behalf.

Check your mileage refund in minutes with TaxBax. Start your claim today.