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Thousands of motorists may be eligible to claim up to £4,000 a year from HMRC. Drivers could claim cash back from the taxman for work-related travel including Clean Air Zone charges.
Changes to the fuel rates at the start of this month have pushed up the amount that can be reclaimed from the taxman if you use your car for work, reports BirminghamLive. Analysis by tax refund experts at RIFT shows that the cost of running a car has climbed substantially over the last year.
The average cost to keep a car on the road – including an MOT, service, insurance and road tax – currently sits at £1,200. This cost has increased by 27 per cent in the last year alone, meaning the average motorist is now paying £256 more a year. Car insurance costs have contributed to this increase to the greatest extent, up 40 per cent annually.
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But there are ways to ease the expense, including claiming cash back from HMRC. Advisory fuel rates allow people to be compensated and the good news is that as of September 1, these rates have increased for many motorists. Those with petrol cars between 1401cc and 2000cc can now claim £0.16 per mile, an increase of £0.01. Petrol cars over 2000cc have seen a £0.02 increase, allowing them to now claim £0.25p per mile. Diesel drivers over 2000c have also seen a £0.01 uplift, allowing them to claim £0.19 per mile.
This means motorists in petrol cars between 1401cc and 2000c can claim an average of £2,650 back per year. Those driving cars with an engine greater than 2000cc can claim an average of £4,140 per year. While drivers with a diesel engine larger than 2000cc can claim £3,146 per year.
Government guidance confirms you may be able to claim tax relief if you use cars, vans, motorcycles or bicycles for work. This does not include travelling to and from your work unless it’s a temporary workplace.
How much you can claim depends on whether you are using a vehicle that you’ve bought or leased with your own money, or a vehicle owned or leased by your employer (a company vehicle). You can claim for this tax year and the four previous tax years if you are eligible.
If you use your own vehicle for work, you may be able to claim tax relief on the approved mileage rate. This covers the cost of owning and running your vehicle. You cannot claim separately for things like fuel, electricity, vehicle tax, MOTs and repairs. To work out how much you can claim for each tax year you’ll need to:
- keep records of the dates and mileage of your work journeys
- add up the mileage for each vehicle type you’ve used for work
- take away any amount your employer pays you towards your costs, (sometimes called a mileage allowance)
What about Clean Air Zones – is there any tax relief?
For thousands of motorists, congestion charges and Clean Air Zone charges have added a further financial strain to the cost of running a car on a day-to-day basis. The charge for Birmingham’s Clean Air Zone is £8 per day for cars, taxis and vans and £50 per day for coaches and lorries. For cars, that mounts up to £2,080 over the course of the working year (260 days).
Going into London’s recently expanded Ultra Low Emission Zone (ULEZ) incurs a charge of £12.50 per day and for the average person using a non-compliant car for business purposes, that amounts to £3,250 over a working year.
Specific types of vehicles are exempt from paying to go into these zones – while some drivers will be able to claim these fees back. RIFT says people who are self-employed can claim it back through their self-assessment tax return if the journey was “an exceptional trip solely for business.” In addition, other drivers who aren’t self-employed but need to travel for work can also get tax relief on these charges. Government guidance confirms you can claim tax relief for money spent on things like:
- public transport costs
- hotel accommodation if you have to stay overnight
- food and drink
- congestion charges and tolls
- parking fees
Tax advisors at RossMartin said: “Self-employed and employed drivers are entitled to claim tax relief on clean air charges in all UK cities, including the newly-expanded Ultra Low Emission Zone charge (ULEZ) in London, provided that they are undertaking qualifying business travel when the charges are incurred. Self-employed sole traders and partners are entitled to claim tax relief on business travel expenses, which would include low emission zone charges.
“Employees must meet an additional test for relief to be available, the expenses must have been incurred wholly, exclusively, and necessarily in the performance of their employment.”
Bradley Post, managing director of RIFT, said: “For a great many people, our cars are vital to our professional lives and so while it’s often the most expensive outgoing we may have, it’s a necessary one. But with the cost of living crisis continuing to strain household finances, a steep hike in the cost of keeping our cars on the road is the last thing anyone will want to endure this year.
“To add to this, hundreds of thousands of motorists within the M25 are now subject to the additional cost of paying the ULEZ charge and for those using their car on a regular basis, this cost amounts to thousands of pounds a year. However, you can offset this additional cost against your tax return when using a non-compliant car for work purposes.
“What’s more, advisory fuel rates have increased this month, meaning that the sum you may be eligible to claim when using your vehicle for work has also increased.”
You can check if you can claim tax relief at the GOV.UK website here.
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