Mileage allowance rise 'really important change' for drivers using cars for work says Martin Lewis

MSE_Emily

If you need to use your car for work (not simply just for travelling to or from work) you'll now be able to claim tax relief on 55p per mile for the first 10,000 miles driven in the tax year. This is up 10p from 45p per mile…

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Mileage allowance rise 'really important change' for drivers using cars for work says Martin Lewis

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El_Torro

About time, hasn't changed since 2011. I'm not clear on whether this is temporary (a response to current global oil prices), but it should be permanent.

Grumpy_chap

The change to mileage rate is potentially the biggest thing announced, yet the mainstream media has been focused on free child bus travel for a few weeks, cheaper chocolate, crisps, chocolate (whatever happened to anti-obesity targets?) and cheaper theme park admissions for a few weeks.

Overall, this effort at cost of living support seems like a lot of gimmicks.

PennyNorth

Hi, I’m just trying to get a better understanding of how the mileage and car allowance system works, as there seems to be a lot of grey area and unclear wording in some of the policy documents at the minute in the business I work for.

Currently, I receive 12p per mile because my car is 1200cc, but I believe the maximum is 20p per mile if you’ve accepted a car allowance. What I’m struggling to understand is that before accepting the car allowance, I used to receive 45p per mile from the company. Once I accepted the allowance, this reduced significantly but am I still entitled to claim relief?

Am I correct in thinking I may be able to claim the difference from HMRC/government mileage relief?

Grumpy_chap

https://forums.moneysavingexpert.com/discussion/comment/82012024#Comment_82012024

OK, it sounds as though you receive a car allowance which is subject to tax and NI in the normal way (as that amount of extra salary would attract tax and NI). Often, depending on employer policies, the car allowance is not pensionable.

Then you are paid 12 pence per mile for business mileage (to cover the fuel cost).

From a tax perspective, this works like so:

- Car allowance is subject to tax plus NI.

- 12 pence per mile is not subject to NI.

- For the first 10k miles, you can claim tax relief on the difference between 12 pence per mile and 55 pence per mile. For a basic (20%) rate tax payer this equates to tax relief of ((55-12) x 1000) x 0.2 for every 1k miles. 55-12 = 43 pence per mile. 1000 miles, £430. 20% results in £86 tax relief.

- Above 10k miles, the amount against which you can claim tax relief drops to 25 pence per mile less the 12 pence per mile already reimbursed. Again, for a basic (20%) rate tax payer, this equates to ((25-12) x 1000) x 0.2 for every 1k miles. 13 pence per mile, 1000 miles, £130, 20% results in £26 tax relief.

Hope that helps.