Claiming costs for mileage
Understanding Tax-Free Mileage Rates
Claiming mileage for travelling you do in your job is a fairly normal thing to do. Most employers pay their employees the full tax-free amount per mile, which is 45p per mile. This includes petrol and running costs and doesn’t have to be declared on any forms or dealt with any further by the employee. The employer might be able to claim the VAT back on the fuel element of the mileage, but we won’t cover that in this blog.
Mileage Rates Below 45p
The 45p could easily be 30p or even 60p per mile – but those levels mean there’s a little more work to be done.
At anything under 45p, the employee is able to put the difference on their tax return as a job expense. This reduces their taxable income and, therefore, the tax they pay. This means that an employee on a normal salary can expect a refund of tax when their claim goes in.
Mileage Rates Above 45p
Anything over 45p paid by the employer will need to be treated as a benefit in kind – this is the method by which HMRC collect extra taxes on what’s effectively untaxed income, even though, in this case, one might think it’s not income but a generous reimbursement of expenses.
Considering the Impact of Borrowing
The side effect of claiming the difference (if the employer pays less than 45p per mile) on your tax return is that your reduced income will be seen as exactly that by mortgage lenders, for example. So it’s worth considering not making that claim if the pennies matter when it comes to borrowing.
If you have questions about claiming costs for mileage or need assistance with any tax-related matters, remember that expert guidance is just a call away. At MNE Accounting, we specialise in simplifying complex tax issues and ensuring you get the most out of your tax returns.
Don’t risk overlooking valuable deductions or making costly mistakes. Let our experienced team help you navigate the intricacies of tax rules. Contact us today and discover how we can make your financial journey smoother and more rewarding!