EVs and the tax-free mileage allowance
You’re a director and regularly use your electric vehicle (EV) for business journeys. Your company provides a workplace charger which is free for all staff to use. Does the origin of the electricity impact your claim for tax-free mileage?
Company cars
In order to claim the mileage allowance, the car must be owned personally. If you’re using a company car, you’ll need to consider a different set of rules.
Is it a personally owned car?
When we say a personally owned car we really mean a car that you’re driving, that hasn’t been obtained by the company you’re an employee/ director of.
This means you can still claim the allowance if, e.g., you borrow your spouse’s car to make a business journey.
Tax exemption
Your company can reimburse you for the cost of business miles at a flat rate of 45p per mile for the first 10,000 miles and 25p per mile thereafter per tax year. The reimbursement is free from income tax and NI, with anything in excess of the flat rates taxed as employment income.
This flat rate applies to all cars, including electric vehicles (EVs), and is supposed to reflect the entire cost of using your car, e.g. wear and tear, maintenance, insurance, fuel, etc. A different rate applies for motorbikes and bicycles.
If you give your colleagues a lift you can be reimbursed an additional 5p per mile, per passenger.
Where you’ve charged
The allowance reflects the use of the vehicle as a whole, e.g. including the cost of maintenance and insurance and therefore isn’t adjusted for fuel type or origin.
Example. Richard uses his workplace charging point to charge his (personally owned) EV before visiting a client. He hasn’t paid anything for the electricity and doesn’t pay tax on it because the provision of a workplace charging point is an exempt benefit. Richard can still be reimbursed 45p per mile by the company.
Not reimbursed
Not all employers are willing to reimburse the amounts set by HMRC and in that case, you can claim the equivalent tax relief.
An employee/director who is entitled to, but does not receive, mileage allowance payments as described above may be able to claim a deduction from earnings, being:
- the amount of mileage allowance payments which would have been payable; less
- any payments actually received.
Example. Richard uses his own car to travel to client sites. His employer’s policy is to reimburse 25p per mile for business journeys. Richard can claim expenses of 25p per mile from his employer, and 20p per mile tax relief from HMRC.
You can claim tax relief for business mileage online. You can also claim relief for the previous four tax years.
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