Mileage allowance

mrkjd

HMRC give 45p per mile towards certain transport costs. Our employer only gives us 30p and says we can reclaim the additional 15p thru the taxman. But what the taxman seems to allow is for us to offset the 15p from our taxable income. Which means we actually only “get” 20% of the 15p (for basic rate). Is this correct or am I misinterpreting something?

Dazed_and_C0nfused

Our employer only gives us 30p and says we can reclaim the additional 15p thru the taxman

Your employer is either deliberately lying to give a false impression or doesn't understand this.

HMRC do not pay your mileage, they give tax relief on the difference.

So if you are claiming tax relief on 15p you will save anywhere from 0p to, in exceptional circumstances, 9p in tax.

Most people will save 3p (15 x 20%, the basic rate of tax).

[Deleted User]

The other thing to note is the fact that your employer can only pay you the 30p for the first 10000 miles as the rate above that is capped at 25p

Grumpy_chap

purdyoaten2 said:

The other thing to note is the fact that your employer can only pay you the 30p for the first 10000 miles as the rate above that is capped at 25p

That's not entirely true - the employer can pay whatever they want.  The cap only refers to how much can be paid without an income tax liability possibly accruing. 

In the case of mileage only, if the first 10k miles are paid at 30 pence per mile, that means that £3k has been paid against the tax exempt cap to that point of £4.5k.  It is possible to be receive expenses for 40k miles per year at the flat rate of 30 pence per mile before there is an income tax liability arising:

• 40 k miles @ 30 pence per mile = £12k
• 10k miles @ 45 pence per mile plus 30 k miles @ 25 pence per mile = £4.5k + £7.5k = £12k

Although that means the amount above 10k miles has exceeded the specific allowance on that element, in this context, all the income is lumped and all the allowances are deducted from the total.

The logical extension of saying that the employer cannot pay more than 45 / 25 pence per mile because that is the maximum permitted tax exempt amount would be like saying that the employer cannot pay more than £12,570 as salary because that is the cap set out above which an income tax liability arises.