Tax relief on mileage payments

[Deva Link]

Here's something that's got me stumped:

I changed jobs during the last tax year and changed from getting 15p/mile to 40p/mile for business use of my car.

I understand the bit about claiming back the tax on the difference between 15p and 40p for the first 10K miles, then 15p and 25p on the balance.

However, do I need to take account of the mileage where I was paid 40p - or can I just ignore it?
Say I'd done 10K miles with my new company at the 40p rate, then would I only be able to claim at the 25p rate on all my other mileage?

[Eric Mc]

Your employer is paying you the maximum allowance they can. If and when your mileage exceeds 10,000, they should reduce the amount they pay you to 25p per mile. If they pay you more than these 40p/25p amounts, the excess amounts paid to you would be looked on as "Profit" and you would be taxed on these as a Benefit in Kind.

If employers pay their employee's LESS than the authorised amounts, the employee can make a separate claim for the difference from HM Revenue and Customs.

[Deva Link]

Understand that, but the point I perhaps didn’t make clearly was that I had 2 employers in the tax year.

Employer 1:
I did 15K miles and was paid 15p/mile.

Employer 2:
I did 10K miles and was paid 40p/mile.

For the purposes of claiming a tax rebate, can I claim the full 40p then 25p (less the 15p I was paid) against the 15K miles, or can I only claim at the 25p rate for all 15K miles as I’ve used up my 40p for 10K ‘allowance’ by being paid the full 40p by my second employer?

Or can I just ignore the second employment?

[welsh blackbird]

Deva Link said:

Understand that, but the point I perhaps didn’t make clearly was that I had 2 employers in the tax year.

Employer 1:
I did 15K miles and was paid 15p/mile.

Employer 2:
I did 10K miles and was paid 40p/mile.

For the purposes of claiming a tax rebate, can I claim the full 40p then 25p (less the 15p I was paid) against the 15K miles, or can I only claim at the 25p rate for all 15K miles as I’ve used up my 40p for 10K ‘allowance’ by being paid the full 40p by my second employer?

Or can I just ignore the second employment?

You did 25,000 miles and received £6250. You can claim:-

10,000 miles @ .40p = £4,000
15,000 miles @ .25p = £3,750
Total claim = £7,750
Paid by employer(s) = £6,250
To claim from IR = £1,500

Hope this helps.

[Deva Link]

welsh blackbird said:

You did 25,000 miles and received £6250. You can claim:-

10,000 miles @ .40p = £4,000
15,000 miles @ .25p = £3,750
Total claim = £7,750
Paid by employer(s) = £6,250
To claim from IR = £1,500

Hope this helps.

That was how I feared it might be calculated!

However I don't really see why I couldn't simply ignore the 10K mls where I was paid 40p as that's 'neutral' - not taxable or claimable.

Ignoring it would result in claim to IR of £3000 - so there's quite a big difference (£1200 vs £600 tax rebate).

[Eric Mc]

Why do you think the 40p per mile claim is neutral?

[Deva Link]

Eric Mc said:

Why do you think the 40p per mile claim is neutral?

because (in the normal course of events) it's the approved amount for up to 10K miles - so there's no tax to pay, or rebate to claim.


However, I think I have found salvation:

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EIM31280 - Employees using own vehicles for work: more than one employment: associated employments
Section 230(4) ITEPA 2003

Where an employee uses their own vehicle in the course of more than one employment during a single tax year, each employment is treated separately (so each has its own 10,000 mile higher rate limit for cars and vans, see EIM31240).

and the example at EIM31380:
EXAMPLE 1: employments not associated

Employee H changes from employment X to employment Y at the end of September 2003, using their own van for business travel in both employments. H drives 8,000 business miles in employment X and 4,000 business miles in employment Y.

H has driven 12,000 business miles in the year, but not more than 10,000 in any employment. The higher rate (see EIM31240) therefore applies to all mileage in both employments.

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This could be quite significant for someone who did 10K miles in each of two employments during a tax year, and was only paid (say) 15p/mile both each company.

Edited by Deva Link on Friday 25th May 12:13