Have you been using your car for business purposes? You might be entitled to claim mileage back from HMRC, helping to reduce your tax bill. This process involves filling out a specific form, P87, and understanding the rules and rates set by HMRC. Let's delve into the details of claiming mileage back from HMRC, ensuring you're well-informed to maximize your tax relief.
Before we dive into the process, it's crucial to understand that mileage allowance is a tax-free payment made by an employer to an employee to cover the cost of travel in a personal car for business purposes. If you're self-employed, you can claim a proportion of your car running costs as business expenses. Here's how you can navigate the process of claiming mileage back from HMRC.
Understanding Mileage Allowance Rates
HMRC has set specific mileage allowance rates for different vehicle types. These rates cover all your vehicle's running costs, including fuel, insurance, servicing, and depreciation. It's essential to choose the correct rate for your vehicle, as you can only claim up to the approved amount.
As of 2021/22, the mileage allowance rates are:
- Cars and vans: 45p per mile for the first 10,000 miles, then 25p per mile thereafter.
- Motorcycles: 24p per mile.
- Bicycles: 20p per mile.
Claiming Mileage Allowance for Employees
If your employer pays you a mileage allowance, you don't need to do anything else to claim your tax relief. The allowance is tax-free up to the approved amount. However, if you've received less than the approved amount, you can claim the difference using form P87.
To claim, you'll need to keep a record of your business mileage for at least six years. You can claim for the tax year in which the business travel occurred. If you're unsure about the process, consult your employer or a tax professional for guidance.
Claiming Mileage Allowance for the Self-Employed
If you're self-employed, you can claim a proportion of your car running costs as business expenses. You can either claim the actual costs or use the simplified flat rates. Using the flat rates is more straightforward, as you don't need to keep detailed records of your expenses.
To claim using the flat rates, multiply the business miles you've driven by the appropriate rate. For example, if you've driven 15,000 business miles in a car, you can claim (10,000 miles * 45p) + (5,000 miles * 25p) = £5,250.
Filling Out Form P87
Form P87 is used to claim tax relief on employment expenses, including mileage allowance. You can fill out the form online or download a paper version from the HMRC website. To complete the form, you'll need:
- Your National Insurance number.
- Your tax reference number (if you have one).
- Details of your business travel, including the total business miles driven and the appropriate mileage allowance rate.
Once you've submitted the form, HMRC will calculate your tax relief and adjust your tax code. You should receive your tax refund within six weeks if you've overpaid tax.
Keeping Records
It's crucial to keep accurate records of your business mileage, as HMRC may ask to see them at any time within six years of your claim. If you're an employee, your employer should provide you with a record of your business mileage. If you're self-employed, you can use a simple mileage log or a spreadsheet to record your business travel.
Your records should include:
- The date of each business journey.
- The reason for the journey.
- The starting and ending mileage for each journey.
- The total business miles driven in the tax year.
Claiming mileage back from HMRC can help you reduce your tax bill and ensure you're not out of pocket for business travel. By understanding the rules and rates, filling out form P87 correctly, and keeping accurate records, you can maximize your tax relief. Don't miss out on this opportunity to get back what you're entitled to – start your claim today and make the most of your business travel expenses.