I have a general question about the correct way to calculate the pence per mile to claim tax relief on business miles.
I have laid out two scenarios below and hope someone from HMRC could confirm if I am correct or incorrect in my interpretation.
Figures are given for illustrative purposes and ease of calculation:
Scenario one:
• Employed full time on PAYE
• Salary: £60,000 (higher rate income tax band)
• Car allowance: £6,000 (taxed at higher rate 40%)
• Employee provides: Car, insurance, roadside assistance, service, maintenance and road tax.
• Employer provides: Fuel card for all fuel purchases
• Employee submits monthly mileage log and all personal mileage deducted after tax each month
• Employee submits self-assessment
o Claim tax relief on business miles (45p for business miles up to 10,000 then 25p for business miles over 10,000) with no deduction for fuel card spend etc.
o So 20,000 miles would be:
45p x 10,000 = £4500
25p x 10,000 = £2500
Total for calculating tax relief is £7,000 (this is the figure entered into the self-assessment)
o To calculate return you calculate 40% (higher rate income tax band payer) of £7,000 = £2800
Scenario two:
• Employed full time on PAYE
• Salary: £60,000 (higher rate income tax band)
• Car allowance: £6,000 (taxed at higher rate 40%)
• Employee provides: Fuel, car, insurance, roadside assistance, service, maintenance and road tax.
• Employee submits monthly mileage log and claims pence per business mile back from employer which is reimbursed at 20 pence per mile.
• Employee submits self-assessment
o Claim tax relief on business miles (45p for business miles up to 10,000 then 25p for business miles over 10,000) but as is reimbursed for part of this by the employer they must deduct the reimbursed pence per mile from the 45p or 25p etc.
o So 20,000 miles would be:
45p-20p (reimbursed by employer) = 25p
• 25p x 10,000 = £2500
25p-20p (reimbursed by employer) = 5p
• 5p x 10,000 = £500
Total for calculating tax relief is £3,000 (this is the figure entered into the self-assessment)
o To calculate return you calculate 40% (higher rate income tax band payer) of £3,000 = £1,200
Thank you for taking the time to help with this,
