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Maximising the benefits of Mileage claims and VAT on mileage

Here are a few simple pointers on how much you can claim.

How much mileage can I claim?

If you use your own car to make journeys solely for business purposes during your employment,
you can claim tax relief on your mileage up to the current rates allowed by HMRC.

For cars and vans, the current rates of mileage claims allowed are:

45p per mile for the first 10,000 business miles in a tax year 25p per mile for any miles over 10,000 in the same year the rates are published by HMRC here –

Employers can pay this mileage to employees and claim tax relief on it through their accounts.

Employees that receive less than the HMRC approved rate from their employer may claim tax relief from HMRC as described below.

If your employer provides a company car and you provide the fuel for business use or if you need to fully reimburse your employer for fuel provided for private use so that you are not taxed on a fuel benefit in kind, you must use a reduced rate. That’s because the mileage rates above relate to the running costs of the vehicle including insurance, road tax and repairs, as well as the fuel.

HMRC publishes advisory fuel rates each quarter which detail how much of the mileage allowance relates to fuel. These rates can be found here : 

The rate you can claim is dependent on what fuel the car uses and the engine size.

What records do I need to keep?

If you want to make a mileage claim you must keep a record of it. You will need a log book, spread sheet or claim form to detail each journey. (Our app has a great mileage tracker). You should record the date, the miles travelled and the purpose of the journey.

My employer doesn’t pay the full amount of mileage. How can I claim tax relief on the difference?

Your employer may not pay you the full rate allowed by HMRC for your mileage. The amount your
employer reimburses you will depend on what is included in your contract of employment. If you are paid over the allowable amount, any additional payment is treated as a benefit in kind and you will pay tax on it. However, if your employer pays less than the full claim, you can claim Mileage Allowance Relief on the difference.

To claim this relief you will need to keep a record of the business mileage you have done in the year along with details of how much your employer has paid you for these miles. You will then need to complete a Form P87 which can be found here – can also use Form P87 to claim tax relief on some other expenses you may have to pay as part of your employment which your employer hasn’t reimbursed you for. These are expenses which are solely for business purposes such as hotel and meals, uniforms and subscription fees to professional bodies.

If your claim is over £2,500 you will need to complete a Self Assessment Tax Return to make the claim instead of Form P87.

Can I claim VAT on a mileage claim?

If you are VAT registered, you can claim VAT on a mileage claim, but it is limited to the fuel
element of the claim. You need to use the advisory fuel rates published by HMRC each quarter to work out the VAT (see above).

For example, using the June 2014 rates, with a petrol car with an engine size of 1700cc, you can claim the VAT on 16p per mile, where 16p is the figure inclusive of VAT.

So, if you are claiming 100 miles for the month: 

Your mileage claim would be 100 miles x 45p = £45.00The fuel element of the claim would be 100 miles x 16p = £16.00The VAT you could reclaim would be £16.00 x 20/120 = £2.67

In addition to the normal records you must keep to support your mileage claim, you must keep copies of fuel receipts to cover the total amount of VAT you are reclaiming. So in the above example you would need to keep copies of fuel receipts totalling at least £16.00.

If you have any queries on mileage claims and VAT on mileage, do contact us on 01942 760500 or email Clare


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