Retirement is a very exciting time, but as with all major life changes it can also feel quite daunting and even nerve-wracking. Switching to a pension should be relatively straightforward. If you are going to start receiving a company pension, you will get a P46, a copy of which will also be sent to HMRC. This will trigger a new tax code and should ensure you pay the right rate of tax from now on. If you’re not going to be getting a company pension, you’ll get a P45 instead and you need to send this to your own pension provider. So far so good, but are you sure that is all you are entitled to? If you have been driving a company car all those years, there could be additional mileage allowance owed.
Let’s take the example of Fred Jones. With his job, he got paid 15p per mile for every trip he took on business. Now, HMRC allows for 45p a mile up to the first 10,000 miles, and 25p per mile after that. So even after the 10,000-mile threshold, Mr Jones was missing out on what he could legally claim back. As no one had ever pointed this out to him, and he thought he was already being adequately compensated by his company, he did not bother to look into it. When he came to retire, though, and anxious to make proper budgeting plans for his future, he took some advice and became aware that he had, in effect, been short-changed. He was entitled to 30p a mile for the first 10,000 miles each year, which was the 45p minus the 15p he had already received, and 10p a mile thereafter. The way to claim this was as a deduction against his employment income.
How to Claim
To complete this application to HMRC, Fred Jones had to fill in a tax return, which he had not done before, being a PAYE employee. In the employment section, he was able to show the mileage refund he had calculated. Unfortunately, these claims can only be backdated for four years. Any refunds owed before that window, however legitimate, will not be considered. As it turned out, Fred got a nice cheque for his efforts and would certainly recommend that all business travel drivers check their mileage allowances. If the company does not pay 45p a mile, HMRC may be obliged to provide tax relief on the difference. Remember to keep receipts and good records of distances driven.
Use our free calculator to find out how much income tax you could be entitled to reclaim.Calculate Tax Rebate