How is business mileage tax relief paid?

Csf123456

I have just worked out that I am enitled to a huge amount (£7182) of business mileage tax relief back dated for the last four years. Does anyone know how this would get paid to me as the hmrc website talks about payment through my tax code this year and next? I was thinking about giving my job up to look after my little boy and am confued as to how this might work.

HappyMJ

You can get a cheque. You will not get £7,182 you will most likely get 20% of that figure.

Csf123456

Thanks but do you know why it would only be 20%? I have deducted what my employer pays to me from the 45p per mile up to 10,000 miles and what they pay to me up to 25p per mile for mileage exceeding 10,000 miles and albeit a large amount what it works out to be.

sweetietot

You can only claim for tax relief on the difference, HMRC does not give you the full amount just because your employer does not pay the approved rate. You will need to complete a form P87 for each year separately, also a separate form if you had more than one employer. If this is the first time you have claimed, HMRC may ask for more information regarding your mileage claim

You may find more info on Cutting Tax part of forum.

Csf123456

Thank you but I have already deducted what my employer pays to me and having done all the sums it works out to be £7182. I am certain I have got this figure right as I have already recieved advice from an accountant on this. My question really only relates to how I would recieve the amount. There is little information available on this.

Notmyrealname

Csf123456 wrote: »

Thank you but I have already deducted what my employer pays to me and having done all the sums it works out to be £7182. I am certain I have got this figure right as I have already recieved advice from an accountant on this. My question really only relates to how I would recieve the amount. There is little information available on this.

OK it works like this.

Your employer can pay you up to 45p per mile tax free for the first 10,000 miles then 25p per mile thereafter. So do 1000 miles and you get £450 which you pay no tax on.

If your employer doesn't pay you, you can claim the mileage as a tax deductible expense via a P87 Expenses in Employment. You then are reimbursed as follows:

Total Taxable Income for 2012-2013 = £12,000
Income Tax Paid: £779.

Now you file a P87 for 1000 miles at 45p = £450. The amount is deducted from your gross income for tax:

Total Taxable Income for 2012-2013 = £12,000 - £450=£11550
Income Tax Due: £689
Income Tax Paid: £779 (because you paid tax through PAYE on £12000)
Refund Due: £90.

If you're in the 40% tax bracket then you'll be reimbursed at 40% for some or all of it depending on how much you earn over the 40% lower threshold. If you don't earn enough to pay any tax you'll get nothing and if you don't earn sufficient to cover the amount claimed over the lower 20% threshold, you'll get less than 20% of the full amount.

As a final note, do you have business use on your insurance or does your employer have a policy covering your vehicle for business use? If not then you are driving uninsured....

HappyMJ

Notmyrealname wrote: »

As a final note, do you have business use on your insurance or does your employer have a policy covering your vehicle for business use? If not then you are driving uninsured....

Anyone would still be insured for third party risks which is the legally required insurance. Any damage to your own vehicle may not be covered in the event of an accident.

Caz3121

here is the information http://www.hmrc.gov.uk/mileage/index.htm

I am really surprised if an accountant thinks it is the full amount you get back and not the tax relief.

Previous years should be refunded by cheque (I did this a couple of years ago via the P87) and current year may be by tax code change

Also if you are claiming more than £2,500 then this will need to be through Self Assessment.

Csf123456

Thank you so much 'not my real name' and 'Caz3121' for spelling things out so clearly. I can honestly say the accountant I spoke to did not do just that. I will work out the figure as now I understand it and I will post the revised figure for anyone interested. I am new to this forum and only joined to gain this information so thanks once again!
I own my own car and use it for work but I do have insurance to cover me for business use.

alwaysonthego_2

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