Mileage and tax with car allowance

03022242

Hi all,

I currently get 5k car allowance which is added to my salary and I pay NI and Tax on, with the job I travel around 2500 per year and my employer pays me 15p per mile.

i have been told that I am allowed to claim back the extra 30p per mile? If so would this be 2500x30p which should equal £750 

or

i have also been told it’s the tax relief on the 30p, ie 6p therefore £150 

which is correct? 

I earn around 55k therefore a higher rate tax payer, so how would this impact the tax relief ?

Phoenix72

You would get tax relief on any allowable expenses at your marginal rate.

Dazed_and_C0nfused

03022242 said:

Hi all,

I currently get 5k car allowance which is added to my salary and I pay NI and Tax on, with the job I travel around 2500 per year and my employer pays me 15p per mile.

i have been told that I am allowed to claim back the extra 30p per mile? If so would this be 2500x30p which should equal £750 

or

i have also been told it’s the tax relief on the 30p, ie 6p therefore £150 

which is correct? 

I earn around 55k therefore a higher rate tax payer, so how would this impact the tax relief ?

Whoever told you that is deliberately misleading you or doesn't know what they're talking about!

Or maybe is referring to claiming from your employer as that is the only way you can get the extra 30p/mile.

Anyway, the answer is neither of your options. 

For business mileage you can claim tax relief on the difference between the official rate (45p) and what your employer pays (15p). 

So on 2,500 miles you would be claiming tax relief on £750.  And if you have paid higher rate tax on at least £750 of your earnings that will save you £300 in tax (equivalent to 12p/mile). 

Obviously going forward persuading your employer to pay at least 28p/mile is better for you financially 🙂

Bookworm105

45 ppm (as total annual business mileage <10k pa) so technical entitlement 2,500 x 0.45 = £1,125 expense claim x tax relief (! assume all 20%) = £225

actual tax relief received 2,500 x 0.15 = £375 cost x tax relief (I assume 20%) = £75

Net tax owed to you 225-75 = £150 cash refund