Freelancers' Questions: Can I get tax relief on mileage included in my fee?

Freelancer’s Question: My contract is paid per job and included in that price is mileage and parking. Can I claim tax relief on mileage from HMRC?

Expert’s Answer: I'm going to assume for the purposes of this question that you're operating through your own limited company and being paid per job according to your invoices, and that you're not within IR35. In other words, this answer is based on you being paid as an independent freelance contractor, rather than as an employee.

In this case, you'll need to include what your customer pays you for mileage as part of your company's income, but if you're travelling on business on your own car, you would be able to claim tax relief on your journeys by including them in your company's accounts as a cost.

That cost would be 45p/mile for the first 10,000 miles you travel in a tax year (6th April to 5th April), and 25p/mile thereafter for the rest of the miles you travel in the tax year. For example, if you have travelled 15,000 miles on business in the year 6th April 2016 -- 5th April 2017, you would include a total of (10,000 x £0.45 + 5,000 x £0.25) = £5,750. This cost reduces the amount of profit on which your company would pay tax, which is the way you would claim tax relief on your business mileage in your situation.

It might be helpful to add that if you’re not an independent freelance contractor but an employee, and your employer paid you less than the above amount for miles you travelled on your employer's business in your own car, you can claim back tax relief on the difference, which is called “Mileage Allowance Relief.” So, using the above example, if your employer paid you £0.30 for every business mile you travelled, you would be able to claim tax relief on the difference between £5,750 and £4,500 by means of either your own tax return or a form P87. Good luck!

The expert was Emily Coltman, chief accountant at online accounting software solution FreeAgent.


25th October 2017

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