Mileage Allowance Relief - everything you need to know
This article will guide you through the process of claiming Mileage Allowance Relief (MAR) for your business mileage. Here you’ll learn:
- The difference between MAR and MAP
- What Mileage Allowance Relief is
- Under what circumstances you can claim it
- What the rates are for claiming mileage
- How to make a HMRC mileage claim
Wait - what’s the difference between MAR and MAP?
HMRC does love an acronym! The easiest way we have to keep track of the two acronyms here is:
- MAP (or a Mileage Allowance Payment) is provided by your employer.
- MAR (Mileage Allowance Relief) is provided by HMRC in the form of tax deductions - should you not receive a MAP from your employer.
So, what exactly is Mileage Allowance Relief?
Mileage Allowance Relief (MAR) is a tax deduction for employees that have incurred business mileage and are not fully reimbursed by their employer. Keep in mind that different rules apply if you use a company car (we’ll come to that later in the article).
If you earn less than the personal tax allowance and therefore do not pay tax, you will not qualify for tax relief.
When you use your personal vehicle for business purposes, many employers will reimburse you per mile with Mileage Allowance Payments (MAP). HMRC provides advisory mileage allowance rates that your employer can use - the current rate is set at 45p. Read more about the current HMRC mileage rates.
Let's go through a quick example of how to calculate mileage reimbursement at the advisory rate:
In one year you drive 5000 miles for work purposes and your employer uses HMRC’s advisory rate. To calculate your reimbursement, you simply follow the below:
[miles] x [rate]
5,000 x 0.45 = 2250 GBP
However, do keep in mind that following HMRC’s advisory rate is a suggestion to your employer and not a requirement. If you don’t receive mileage allowance, you are entitled to claim MAR on all your work-related driving at the advisory mileage rates.
So what happens if I receive a MAP from my employer?
If you receive a MAP, the outcome will be based on your individual circumstances, as per the below:
- If your employer fully reimburses you with the approved amount of mileage allowance for the year, you have nothing to claim and are not eligible for MAR.
- If you are paid more than the approved amount of MAP, any sum you have received on top of the advisory rate for your business mileage will be taxed through PAYE. You have nothing to claim and are not eligible for MAR.
- If your employer reimburses you under the approved amount of mileage allowance, you are entitled to claim tax relief for the tax year on the “unused” amount of the mileage allowance.
- If you are not paid a mileage allowance at all, you are entitled to claim MAR on all your work miles at the advisory mileage rates.
Additionally, If you use a company car and your employer does not reimburse you with the full Advisory Fuel Rates (AFR) you can claim MAR on your fuel costs for business trips. For more on this specifically, you can check out HMRC’s website.
Is there anything else I should know about HMRC mileage claim rates?
The Mileage Allowance Relief is based on HMRC’s approved mileage rates. The current rates are:
- 45p for cars and vans for the first 10,000 miles. After 10,000 miles, the rate changes to 25p per mile.
- 24p for motorcycles regardless of miles driven.
- 20p for bicycles regardless of miles driven.
You can only receive MAR for the amount not covered by your employer. For example:
You have driven 4500 miles for work this year with your car and your employer has reimbursed you with 30p per mile.
Using the same calculation from above, you will see that:
[miles] x [rate]
4,500 x 0.30 = £1,350.00 GBP in received mileage allowance.
In this case, you are entitled to claim MAR for the additional 15p per business mile driven.
4,500 x 0.15 = £675.00 GBP in MAR.
See here for updated information on HMRC mileage rates for 2022.
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How do I claim Mileage Allowance Relief?
You can claim tax relief at the end of the tax year from HMRC. To qualify here’s what you need to do:
- Keep accurate records of your business mileage.
- Add up your business mileage for the whole year.
- Add up the Mileage Allowance Payments you have received throughout the year.
- Subtract the received MAP from the approved amount you should have received.
If you usually do not need to complete a tax return, you can use form P87 on HMRC’s website to claim MAR. If your total expenses claim is more than £2,500, you will need to use your Self Assessment tax return.
What records do I need to keep to claim Mileage Allowance Relief?
In order to claim Mileage Allowance Relief, you will need to keep records of your business trips throughout the year. For your records to be sufficient for an HMRC mileage claim you need:
- The date of the trips
- The start and end address of each trip, including postcode
- The distance travelled
- The total amount of mileage allowance you have received from your employer.
You can supply the same records to your employer and HMRC as long as they include the details listed above.
It’s up to you to decide if you would rather keep analogue or digital records, but there are several phone applications (including ours) that create clear, tax compliant records automatically - saving you quite a bit of time in the process.
That's it for our guide to the Mileage Allowance Relief! We hope we've been of assistance :)
This material has been prepared for general informational purposes only and is correct at the time of publishing. It should not be taken as professional advice from Driversnote. We recommend seeking independent legal, taxation, or financial advice from a professional to check how this information relates to your own circumstances.