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Claiming Mileage Allowance Relief as a Home Care Worker

If you’re a Homecare worker and use your personal vehicle for work-related duties, it’s likely you can claim Mileage Allowance Relief from the Inland Revenue.

What is Mileage Allowance Relief?

Mileage Allowance Relief boosts the income you can earn before paying income tax. The HMRC approved Mileage Allowance Rate for cars is currently 45 pence per mile. However, you must subtract any mileage payments your employer provides from this amount. For instance, if your employer contributes 20 pence per mile, your claim to HMRC will be based on the remaining 25 pence.

The relief claimed is not a full refund but a tax-free allowance on the claimed amount. For example, if you drive 10,000 miles annually for work and claim the full 45 pence allowance (with no mileage contributions from your employer), your Personal Allowance will increase by £4,500.

Am I Eligible for Mileage Allowance Relief?

Your eligibility and the final value of your allowance depend on a few key factors:

  1. The journey must be work-related, like visiting clients at their homes. Your commute to and from work doesn’t qualify.
  2. Deduct mileage payments received from your employer from the total claimable amount.
  3. The 45 pence per mile rate is applicable only for the first 10,000 miles. Beyond that, the claimable rate drops to 25 pence per mile.
  4. The 45p Mileage Allowance Relief applies when using your car. You can claim an extra 5 pence per mile for carrying a passenger. The rates for motorbikes and bicycles are 24 pence and 20 pence respectively.

Calculating Your Mileage Allowance Relief

Consider a Homecare Worker earning over £16,000 annually who drives 12,000 work-related miles per year and receives a 5-pence per mile contribution from her employer.

Here’s the calculation:

  • 10,000 miles @ 40 pence (45 pence minus 5 pence employer contribution) = £4,000
  • 2,000 miles @ 20 pence (25 pence minus 5 pence employer contribution) = £400
  • Total Mileage Allowance Relief = £4,400 (£4,000 + £400)

This allows her to earn an extra £4,400 each year before paying income tax. As a 20% taxpayer, this relief is worth £880 annually.

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