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Where an employer does not pay a mileage allowance to an employee who uses his or her own car for work or pays an allowance which is less than the approved amount, the employee can claim tax relief for the shortfall. This can be done in the employee’s self-assessment return, on form P87 or by writing to HMRC.
Mileage Allowance Relief Example
Gillian uses her car for work. Her employer pays her a mileage allowance of 30p per mile. In 2019/20 she drove 9,000 business miles in her own car.
Gillian received mileage allowances of £2,700 (9,000 miles @ 30p per mile) from her employer for using her car for business.
The approved amount is £4,050 (9,000 miles @ 45p per mile). Gillian can claim tax relief for the shortfall of £1,350. If she is a basic rate taxpayer, this is worth £270 (£1,350 @ 20%). If she is a higher rate taxpayer, it is worth £540.