If I use my car for work, can my expenses be paid tax-free out of my salary?

admin
16 October 2014

Q

If I am offered a job that requires me to use my own car but I am not offered travel expenses, can I ask for the equivalent reimbursement of travel to be paid free of tax and National Insurance out of my wage?
From
LB/Huddersfield

A

Employees can be reimbursed tax free up to HMRC authorised limits for mileage for valid business journeys in their own car.

Currently, these are 45p per mile for the first 10,000 miles and 25p per mile thereafter.

If an employee receives less than the authorised mileage rate, they can apply to HMRC to receive a deduction from their employment income for any underpayment.

If they receive an amount greater than the HMRC authorised rate, they should declare the excess and they will have to pay tax on this amount. A taxpayer can either make this application by completing a self-assessment tax return at the end of the tax year or by asking for an amendment to his tax code and then the amount can be reimbursed or paid through the PAYE system.

The business journey must be wholly necessarily and exclusively incurred in the performance of your duties, and the employee is obliged to incur the expenditure as holder of the employment. Commuting to and from work does not qualify but travel to a temporary workplace does, provided the time at the site does not exceed and is expected to be less than 24 months.

I don't recommend that your employer reduces the tax on your wages on each payday by the amount of mileage you have done as this is likely to be seen as a clear measure to avoid tax when the underlying contract was clearly payment for employment.

It would be simpler to make the claim as outlined above and it will have the same tax effect. It is worth noting that where you incur other such expenses that are wholly necessarily and exclusively incurred as a result of your employment and no allowance is given to you by your employer, you can claim a deduction in the same way.

David Wesley-Yates is a chartered tax adviser at Red & Black Accountancy