How to claim a tax rebate on work mileage

If you are employed and use your personal vehicle for work purposes, then you should check whether you are entitled to a tax rebate on your work mileage.

Mileage Allowance Payments

HMRC sets out a tax free amount (mileage allowance payment) that can be reimbursed to employees who use their own cars, motorbikes or bikes for work purposes. These rates for 2017 are as follows:

Type of vehicle First 10,000 miles Above 10,000 miles
Cars and vans 45p (40p before 2011 to 2012) 25p
Motorcycles 24p 24p
Bikes 20p 20p

If you are an employee and have received less than the mileage allowance payment rate for business mileage, then you may be able to claim for Mileage Allowance Relief meaning you get a tax rebate for any unused allowance.

Example of Unused Mileage Allowance Payments

Bob is employed as a consultant and travels to a clients site several times throughout the year.  His business mileage amounts to 5,000 miles for the tax year (6th April to 5th April) and his employer reimburses him 30p per mile, a total of £1,500.

The HMRC mileage rate up to 10,000 miles for a car is 45p therefore Bob has missed out on 15p per mile or £750 of tax free mileage.

Bob can apply to HMRC for tax relief on the additional mileage and he will save tax at the highest rate of tax he pays. So if Bob is a 40% tax payer he will save £300 on his tax bill.

What Records Do You Need?

You must keep detailed records of where you have been – dates, clients, mileage involved.

Travel from home to your normal place of work is not allowable. 

How to Claim for a Tax Rebate on Work Mileage

Tax Rebate Claims Up to £2,500

  • Completing a P87 form online HERE and returning the form by post to the address included at the end of the form;
  • Online by either creating an online account or accessing your exiting HMRC account HERE;
  • Phoning HMRC on 0300 200 3300, if you have claimed successfully before. Make sure you have your national insurance number ready;
  • On a self assessment tax return, if you complete one already for other reasons.

Tax Rebate Claims over £2,500

You can only claim for your mileage rebate using a self assessment tax return. You need to register with HMRC, which you can do HERE, in order to complete your self assessment tax return online. The HMRC registration process can take up to 10 days and once it is completed you will receive a letter from HMRC with your UTR number (Unique Taxpayers Reference). Keep this safe as you will need this code to file your Self Assessment Tax Return.

In both the above cases, you will receive your tax rebate through your tax code.  You and your employer will receive a letter from HMRC notifying you of a change in your tax code.  This change will mean that your employer will amend the amount of tax they deduct from your pay to ensure that you receive your mileage tax rebate from HMRC.

Top Tax Tip

HMRC states you can claim within 4 years of the end of the tax year that you spent the money. This means if you have missed any claims in the previous 4 years you should be able to claim retrospectively for your missed tax rebates.  It is advisable to call HMRC on 0300 200 3300 to discuss historic claims before you submit them.