Tax relief - query on the calcs

theWD

Hi
I've rarely claimed tax relief in the past, but am doing so this year for milage I've driven, in my own vehicle, for work purposes.  My query regards the logic HMRC use.  Their site says:

"You will receive tax relief on the amount you claimed at the rate of tax you paid. For example, you make a claim for expenses of £150 and your rate of tax is 20%, the tax relief would be £30."

So the tax relief is 20% of my take-home pay, which I subsequently spent on the expenses.  Is the point of tax relief an acknowledgement that I was taxed on earnings which, with hindsight, I shouldn't have been (because I spent it on work activities)?

If so, why is it not 20% of my pre-tax pay? 

(ie, in the above example, £187 must have been earned pre-tax, to have £150 in their pocket to spend on the expenses.  As such, £37 was deducted in income tax, on earnings which were then spent on work activities).

I may well be missing something, but the above example seems a peculiar logic to me.  Can some one explain?

Thanks!
W

Dazed_and_C0nfused

theWD said:

Hi
I've rarely claimed tax relief in the past, but am doing so this year for milage I've driven, in my own vehicle, for work purposes.  My query regards the logic HMRC use.  Their site says:

"You will receive tax relief on the amount you claimed at the rate of tax you paid. For example, you make a claim for expenses of £150 and your rate of tax is 20%, the tax relief would be £30."

So the tax relief is 20% of my take-home pay, which I subsequently spent on the expenses.  Is the point of tax relief an acknowledgement that I was taxed on earnings which, with hindsight, I shouldn't have been (because I spent it on work activities)?

If so, why is it not 20% of my pre-tax pay? 

(ie, in the above example, £187 must have been earned pre-tax, to have £150 in their pocket to spend on the expenses.  As such, £37 was deducted in income tax, on earnings which were then spent on work activities).

I may well be missing something, but the above example seems a peculiar logic to me.  Can some one explain?

Thanks!
W

I think your basic misconception is that HMRC do not pay your expenses.

If you want to be reimbursed your business expenses then you need to approach your employer and ask them to make the reimbursement.

Where they don't then you can claim tax relief on the expenses (less any partial reimbursement received from your employer).

The tax relief is often 20% of your claim but can range from 0% to over 100% depending on your particular tax position for the tax year in question.

Basically the amount you are claiming from HMRC reduces the amount of your taxable income.  So say you earn £25,000 and have claimed tax relief on £500 then you will only be taxed on £24,500.

theWD

That makes sense.  Thanks for clarifying.  W