Tax relief on mileage - self employed.

[Issi]

Hi All,

Excuse me for being a bit thick, but can anyone explain to me in laymans terms, what exactly tax relief on mileage means if you're self employed.

I've read that you can claim 40p per mile for the first 10,000 miles and then 25p per mile for anything over 10k.

This is where I'm coming a bit unstuck, does this just mean that you don't pay tax on the cost of the fuel you've put in your vehicle?

It doesn't mean that the HMRC will pay you 40p per mile because you're self employed does it?

As I said, excuse me for being a bit hard of thinking but after working for 25 years, this is the first time that I've had to think about these things.

Cheers

[marshalla]

Your allowances are a bit out of date.

http://www.hmrc.gov.uk/rates/travel.htm


It means that you can reclaim up to that amount for business journeys without attracting extra tax or use the difference between what you're paid and the maximum allowed as an allowance against your own income tax liability. It is intended to reflect the costs of fuel, depreciation, maintenance and insurance for personal vehicles.

More detail here : http://www.hmrc.gov.uk/mileage/index.htm

[karona]

Let's say you've done 40,000 Business miles in a tax year. When you complete your tax return add up 10,000 x 0.40 and 30.000 x 0.25 which gives you 4000 + 8750 = 12,750.

Let's say you earned 100,000 for the year. Deduct the 12,750, leaving you 87,250 earnings, calculate your tax liability on that figure.

You cannot claim any other business related motoring expenses, insurance, servicing, depreciation etc., the 40p is to cover them all.



edit: marshalla beat me to it

[Issi]

Brilliant! Thanks Guys!

[Eric Mc]

You mean you DON'T use an accountant?