Introduction
Mileage Allowance Relief (MAR) is claimable by any self-employed individual or employee who is claiming work-related mileage expenses in the United Kingdom. A portion of your business miles driven in your car can be claimed back as a tax deduction under MAR if your employer pays a lower mileage allowance or no mileage allowance at all according to the approved HMRC rates.
What is Mileage Allowance Relief?
Mileage Allowance Relief is an allowance available for the employees and self-employed against whom they personally use their cars for any business purpose.
- If your employer reimburses you at less than the HMRC approved rates, any excess of the latter can be claimed as tax relief.
- If your employer makes no contribution to your business-related mileage, you can claim the entire approved rate as tax relief.
- A deduction for business mileage can be allowed to self-employed earners.
MAR isn’t a cash payment from HMRC. Instead, it cuts down your taxable income, which helps shrink your tax bill.
The M.A.R standard rate is:
- 45p per mile for the initial 10,000 miles of business travel in a tax year.
- 25p per mile for any more miles after the initial 10,000 miles.
You can claim a tax refund for the difference between the rate you are paid and the approved rate if your employer pays you at a rate that is lower than or up to the maximum approved amount by HMRC. You do not need to claim if your employer pays you at or above the approved amount.
Eligibility for Mileage Allowance Relief
Both self-employed people and employees using their private cars for work can claim MAR. But there are some important points to remember:
- Self-Employed People: Self-employed can claim the entire cost of business mileage using the right rates set by HMRC.
- Employees: In case of employees, MAR can be claimed if the employer does not fully compensate the business mileage. If the employer does compensate but the rates are lower than those set by HMRC, then the employees can reclaim the difference from HMRC.
Key Points to Remember About MAR
A few important things to note before moving on to the exact process of where to enter your Mileage Allowance Relief on your Self Assessment form.
Records: For MAR claims, it’s vital that you keep detailed records of your business mileage showing the dates, distance, and the purpose of the journey. This will be necessary to support your claim if HMRC asks for more information.
Claim for Each Vehicle: In case you use multiple vehicles for business, calculate and claim for each vehicle.
Business Mileage: Only for business can be claimed. This does not include the regular journey to the workplace and back home. However, if the travel is between multiple work locations or to the clients’ offices, these miles are considered as business mileage.
Annual Limits: Recall that the initial 10,000 miles are repaid at 45p per mile and any mileage in excess of that repaid at 25p per mile.
VAT: If you are VAT registered and have included the VAT on the fuel cost in your vehicle details, you cannot claim back the VAT-inclusive amounts on your mileage allowance. MAR is worked out without VAT, so you will only get the net amount back to you.
