EIM71165 - Volunteer drivers’ guidance: other costs

Interest on a loan to buy my car

If you buy your car with a loan or on hire purchase, you can deduct a proportion of the interest you pay in working out your profit. Only count the interest included in hire purchase instalments.

The interest that can be deducted is the proportion relating to your volunteer driving. Calculate this by comparing the number of volunteer miles you have driven with your total mileage for the year.

If in the tax year 2017 to 2018 Richard paid interest of £75 on a loan to buy his car, he can deduct part of that amount from the profit figure of £720 (from example 1). Richard drove 20,000 miles in the year, of which 16,000 were for the charity, so four-fifths (16,000/20,000) of the interest he paid can be deducted. Richard can deduct the £60 from the £720, which leaves a profit figure of £660.

Please note, you cannot deduct actual interest costs if you use the tax free mileage allowance rates as this already accounts for finance costs.

Telephone and postage costs

In working out your profit, you may also deduct costs of phone calls (but not line rental) and postage costs incurred because of your volunteer driving which are not reimbursed. You may find that after deducting the tax-free allowance there is no profit, as shown in the example below.

Example

In the tax year 2017 to 2018 Rachel drives 12,000 miles for a charity which pays her 42 pence a mile. She receives £5,040 from the charity (12,000 miles at 42 pence). Again, the tax-free allowances are the first 10,000 miles at 45 pence a mile, and 25 pence a mile above 10,000 miles. Rachel also has £200 postage and telephone costs which she can take into account when calculating the profit.

Step 1

Rachel has received £5,040 mileage allowance payments received from the charity.

Step 2

Rachel’s total mileage travelled for the charity is 12,000 miles.

Step 3

The tax-free allowance is 45 pence a mile for the first 10,000 miles, and 25 pence for miles over 10,000.

Step 4

Rachel multiplies the 45 pence figure by 10,000 giving a figure of £4,500. She then multiplies the 25 pence figure by 2,000 giving a figure of £500. Together the 2 amounts produce an amount Rachel can receive free of tax of £5,000.

Step 5

Rachel deducts the costs of phone calls and postage of £200 from the mileage allowance received from charity. The result of £4,840 is less than the figure of £5,000 at step 4 so there is no profit.

Passengers

The voluntary organisation can pay you up to 5 pence per mile for every passenger you transport as part of your voluntary driving. This is independent of the mileage allowance you receive from the voluntary organisation and should not be included in any of the calculations.

If you are paid both a mileage allowance and a passenger rate, they should be separated before you calculate any profit.