Drivers with organised mileage reimbursement schemes will need to know whether they are liable to pay tax on the mileage payments they receive or any other allowances that they may get for the running costs of the car they use.
As a starting point, if your employer operates a mileage reimbursement scheme, then you will need to pay tax on any allowances which exceed the costs that you incur. Basically this means that if you make a profit, you will be liable for tax. The tax year begins on the 6th of April and ends on the 5th of April the next year, so this is the period for which you will need to keep records and check whether you are in profit.
Rate of Taxation
Most people are liable for income tax at the basic rate, which is 20%. This means that for every pound that you earn which is above the costs you incur, you will have to pay 20 pence in income tax. There are some mileage allowances which are free of tax that a driver can get without having to pay any tax on them for the year 2011-2012. These are 45p per mile for the first 10,000 miles, and 25p per mile for every mile over 10,000.
As an example, if the organisation that you work for gives you more than 45p per mile and you drive 5000 miles in a tax year, you will have to pay tax on the profit which you will be making on each mile you drive. However, if you are paid 45p per mile or less, then you will not be liable for any tax. This means that instead of having to keep track of all the expenses associated with running a vehicle and fuel consumption, you just need to keep track of the miles that you drive over the tax year and the amount that you receive for them. You may, however, also keep records of your actual motoring costs and simply claim these if you choose to do so.
This means that you will need to keep fairly detailed records, however, and it is so much easier to do so as you go along rather than trying to remember everything when it comes to completing your tax return. There is nothing worse than finding that you do not have the correct information to hand when it comes to completing your tax return. When the deadlines are looming, you will find it much easier if you have all the information to hand. Remember that failing to complete your tax return correctly and pay any tax due on time can result in penalties and fines. If you are in any doubt as to the details of your tax return, then seek advice before you submit it.
Use our free calculator to find out how much income tax you could be entitled to reclaim.Calculate Tax Rebate