With the rise in the cost of living in the UK now, every little helps like a popular supermarket over here states.
The cost of motoring is high and commuting between workplaces will invariably increase.
In this blog post, I will like to write about how to reduce your cost of travel by claiming Qualifying travel expenses.
How to reduce travel costs by claiming tax relief from travelling costs?
One way to reduce the travelling cost is by claiming tax relief from the cost of travelling.
The rate of this relief could be at 20% or 40% or 45%.
For example let’s say the cost of travelling for Tim is £1000 if he pays taxes at 20 % the tax savings would be £200 and if he pays tax at 40%, the tax saving would be £400.
This tax savings could be used by Tim to reduce the cost of the car in the long run.
What qualifies as a travelling cost?
For an expense to qualify as a travel cost it must have been spent wholly and exclusively for work.
An individual can also claim tax relief from expenses that relate exclusively and wholly to the travel made for work .
An example of such is hotel cost, feeding e.t.c to make such a claim it must be directly related to a travelling cost made for purpose of work.
Travel cost from home to work is not a qualifying expense and if you make this claim, even if you receive the payments from the HMRC,
From our experience, the revenue usually claimed back the expense’s from the client even after several years of making such claims and at this time it comes with a penalty and interest.
So the tax relief or tax-saving I am referring to in this blog is the one that relates to qualifying travelling expenses.
When can travelling cost to work be classified as a qualifying expense?
The only time travelling from home to work is when you travel to a temporary workplace from home.
At times you could be seconded to a temporary place to work on behalf of your business.
When this happens, you can claim for travel from your home to the temporary place.
The tax law defines a temporary place of business as somewhere where you would be working for less than 2 years.
Also, when your employer has already paid for the work travel, you are not allowed to claim the revenue again.
The reason why you are not allowed to claim this relief is that your employer would be claiming tax relief from the revenue.
If you also claim relief from the revenue, it will result in receiving relief twice on the same transaction.
When can you claim tax relief for travelling for work?
As an employed taxpayer in the UK, you are allowed to claim tax relief from the revenue when:
- You have travelled for the purpose of work
- The employer has paid less than 45p as reimbursement per mile or has not reimbursed the cost of the journey.
The reason for claiming tax relief from the revenue is because when you have qualifying travelling costs,
your employer could either pay you 45p per mile for the first 10,000 miles or 25p on an additional journey.
What happens when the employer gives a reimbursement that is more than 45p per mile?
When the employer pays more than this rate, the excess amount is a taxable benefit they will have to report the cost to HMRC.
The employer will report the amount paid to the HMRC through the use of a P11D form.
When this happens there will be a tax consequence for both employer and employee.
The employee will pay tax on the excess amount whilst the employer will pay national insurance.
How do you claim travelling costs from HMRC?
If you are employed and have travelled for work, you can claim this cost from HMRC when your employer has not reimbursed you wholly or partly.
You can claim for travel expenses for the last 4 tax years before the current tax year.
When the cost of the travel is more than £2000 in the tax year, the claim would be made through the self-assessment system.
However, if the claim made for each year is less than £2000, you can claim by clicking here.
To make the claims you will need to set up your personal tax account with the HMRC.
Conclusion on reducing the cost of the car by claiming travelling cost.
Thanks for reading my blog, I hope it has enlightened you on claiming travel expenses from the revenue.
Do you have a qualifying travelling expense and would need support in making the claim, kindly contact us.