If you use your personal vehicle for work and your employer pays you less than the HMRC mileage rate, you may be able to claim what is called Mileage Allowance Relief, or MAR.
Essentially, you’re able to claim tax relief on the part you didn’t get back in situations where you’re paid less than the HMRC rate for your work miles by your employer.
Keep in mind that you don’t get paid the whole gap back in cash - you only get the tax relief on it. More on what exactly that means later.
HMRC Mileage Allowance Relief Key Points
- You can only claim Mileage Allowance Relief if your employer pays less than the HMRC mileage rate.
- You only get tax relief on the difference, not the full mileage amount.
- This applies to employees who use their personal vehicles for work.
- You can claim for the current tax year, plus the previous 4 years.
- You will need a clear mileage log to support your claim.
What Is Mileage Allowance Relief?
Mileage Allowance Relief is a form of tax relief for employees who use their personal vehicles for work but don’t get reimbursed by their employer at the HMRC mileage rate.
It’s important to note that the HMRC mileage rate is not what employers are required to pay their employees.
Many companies do use that rate because it’s simple, widely accepted, and doesn’t result in any problems with over- or under-reimbursing, but they don’t have to. They can pay less, more, or use a different method entirely, but that can bring additional complications.
The reason the HMRC rate matters, however, is because it’s the benchmark the HMRC uses to work out how much of your mileage qualifies for tax relief.
Who Qualifies for Mileage Allowance Relief
In order to qualify for MAR, you need to meet a few conditions.
You need to be an employee, not a self-employed worker. You must use your own vehicle for work, and your employer must pay you less than the HMRC mileage rate for your business mileage.
What Are the Current HMRC Mileage Rates?
Here are the current HMRC rates:
- Cars and vans: 45p per mile for the first 10,000 miles, then 25p after that
- Motorcycles: 24p per mile
- Bicycles: 20p per mile
These are the numbers used to calculate how much relief you can claim.
How HMRC Mileage Allowance Relief Works
First and foremost, add up all of your work-related mileage for the year and multiply your miles by the HMRC rate. Then, compare that number to what your employer actually reimbursed you.
You can claim tax relief on the difference between those two numbers. Here’s an example:
Say you drove 1,000 business miles in a year.
What you would have gotten if the HMRC rate was used: 1,000 * £0.45 = £450
If the employer paid you £300 instead, that would result in an unreimbursed amount of £150.
Now, you don’t get that £150 on your taxes. You instead get tax relief on that £150. So, if you’re a basic-rate taxpayer, you would get 20% of that back, which would work out to £30.
How Much You Actually Get Back Explained
Like we just discussed, MAR reduces the amount of your income that gets taxed. It doesn’t pay you the full difference, and how much you get back depends on your tax band/bracket.
If you qualify for the basic rate, you get 20% of the shortfall. If you qualify for the higher rate, you get 40%, and so on.
If we were to expand on the example above, if you fell into the higher-rate band of 40%, you would get £60 back (40% of £150).
Think of it this way - the HMRC treats that shortfall as income you shouldn’t have been taxed on. So instead of paying you the full amount, they refund the tax you paid on it.
That’s why this is called tax relief, not reimbursement.
How To Claim Mileage Allowance Relief
There are two main ways to do it.
Option 1: Self Assessment
If you already file a Self Assessment tax return, you can include your claim there.
Option 2: Form P87
If you don’t file a tax return, you can claim MAR using Form P87. However, if your total annual work expense claim is over £2,500, you’ll need to use Self Assessment.
You can also claim for the current tax year and the previous 4 tax years, as long as you have the records.
Records You Need to Keep
To claim Mileage Allowance Relief, you will need to keep a proper mileage log that contains the following:
- The date of each trip
- Where your trip started
- Why you made the trip
- How many miles you drove
The cleaner your records are, the easier your claim will be. In addition, with Making Tax Digital now in effect, you will need these records to be digital.
The best way to track your mileage is by using an automatic mileage tracker app like TripLog. TripLog starts tracking when you start driving, stops when you stop, and automatically captures all necessary information. It can even auto-categorize your trips as business or personal!
Final note: If you use the HMRC mileage rate, you generally can’t also claim things like fuel, repairs, insurance, road tax, or MOT separately. The mileage rate is meant to cover those.
Mileage Allowance Relief FAQ
Do I get the full mileage amount back?
No. You only get tax relief on the difference. You will not receive the full amount.
Can I claim if my employer pays nothing?
Yes. In that case, you can claim relief based on the full HMRC mileage amount.
Can I claim for previous years?
Yes, you can go back up to 4 years.
Does commuting count?
Regular commutes to your workplace do not qualify.
Mileage Allowance Relief Explained - In Conclusion
Mileage Allowance Relief is basically a way for employees to recover part of the cost when an employer doesn’t fully cover their mileage. Once you understand how the calculation works, the main thing is keeping good records.
A mileage tracking app makes that a lot easier, and your records for tax will need to be digital now anyway. You can download TripLog on iOS or Android and start tracking unlimited automatic miles for free today!
