Katerina Swanson
If you use your own vehicle for business purposes, you may be able to claim tax relief on the money you've spent on fuel. The amount you can claim per mile for fuel depends on the type of vehicle you use, the number of miles travelled, and whether you are an employee or self-employed. For cars and vans, the rate is 45p per mile for the first 10,000 miles and 25p per mile thereafter. For motorcycles, the rate is 24p per mile, and for bicycles, it is 20p per mile. These rates are meant to cover all expenses related to using your vehicle for work, including fuel, insurance, maintenance, and repairs. It's important to keep accurate records and receipts to support your mileage claims.
How much can I claim per mile for fuel?
| Characteristics | Values |
|---|---|
| Mileage allowance for self-employed individuals | 45p for the first 10,000 miles, 25p every mile after that |
| Mileage allowance for employees | 45p for the first 10,000 miles, 25p every mile after that |
| Additional allowance for passengers | 5p per mile for each qualifying passenger |
| VAT on fuel | 20% |
| VAT claimable | One-sixth of the total cost of fuel |
| VAT claimable per mile | 2.33p per mile for a 1401cc to 2000cc petrol car as of June 2018 |
| Mileage allowance for motorcycles | 24p per mile |
| Mileage allowance for cycles | 20p per mile |
| Mileage allowance for electric vehicles | 45p for the first 10,000 miles, 25p per mile after that |
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What You'll Learn
Mileage allowance for self-employed workers
Actual Vehicle Costs
This method involves claiming a proportion of the total cost of running your vehicle, including fuel, insurance, repairs, maintenance, parking, and more. You will need to record all of your business-related vehicle expenses and keep track of every cost, which can be time-consuming and require more record-keeping. This method may be worth it if you have high vehicle expenses.
Simplified Expenses Method
The simplified expenses method is a flat-rate scheme that provides a simpler way to claim back the cost of using your vehicle for business. This method is designed to make tax administration easier and quicker. With the simplified expenses method, you can claim a mileage allowance of 45p per business mile travelled in a car or van for the first 10,000 miles and 25p per business mile thereafter. For motorbike usage, the rate is 24p per mile. It is important to note that you cannot claim simplified expenses for a vehicle you have already claimed capital allowances for or included as an expense when working out your business profits.
Other Considerations
When claiming mileage allowance, it is important to note that you can only claim for business trips and not personal journeys. Additionally, commuting to and from your usual place of work is generally not considered a business trip. However, if you are travelling to a temporary workplace, such as different sites and jobs, you may be able to claim mileage allowance.
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Claiming for business trips in a company car
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, including fuel and electricity for business trips. You can also claim tax relief if you use a company vehicle, but you cannot claim separately for things that are already covered by your mileage allowance, such as fuel.
HMRC has specific company car mileage rates that you can claim, and you might also get some free fuel for private use. The type and amount of travel you do in your company car will impact your mileage claim. If you're not getting the tax relief your work travel expenses entitle you to, you could be missing out.
The HMRC mileage rates are 45p per mile for the first 10,000 miles and 25p per mile after that for business-related driving. If your reimbursement is higher than the advisory rates per mile, your mileage allowance will be taxed as income. Your employer will require proof of your business-related driving in the form of mileage records.
If you drive a hybrid company car, you'll use the standard rates for petrol and diesel cars. There is no special rate for hybrids. If your company car is electric, you can claim 5p per mile using the Advisory Electricity Rate (AER).
If you carry fellow employees in your vehicle on work journeys, you can claim 5p per passenger per business mile.
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Calculating car benefit for free or subsidised fuel
If you use your own vehicle for work, you can claim tax relief on the money spent on fuel and electricity for business trips. This is known as the Mileage Allowance and is a tax-free allowance for self-employed people. The exact amount you can claim depends on how much you travel for business. You can claim 45p for the first 10,000 miles and 25p for every mile after that.
If you have a company car and receive free or subsidised fuel for private use, you will need to pay a company car fuel benefit tax. This is because HMRC regards this as free fuel. You will need to calculate the vehicle's benefit-in-kind (BIK) with a fuel charge multiplier. The BIK tax is evaluated by multiplying the car's CO2 emission level, the value of the car when new (including any modifications), and your income tax bracket.
To calculate the benefit charge on free or subsidised fuel, the appropriate percentage used in calculating car benefits is applied to a set figure known as the car fuel benefit multiplier. You can use HMRC's company car and car fuel benefit calculator to help you with this. You can also use the RAC Fuel Card to help you track fuel expenses and gain insights into your fleet's fuel consumption patterns.
If you are an employer and you pay for your fleet's fuel during personal time, you will need to pay the full cost of the fuel, plus a significant amount of National Insurance. This is because you are giving out a taxable company benefit. It is worth researching the typical amount you would have to pay before agreeing to a company car with car fuel benefit fees attached.
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Claiming VAT on mileage
If you use your vehicle for business purposes, you may be able to claim VAT on your mileage expenses. This applies to self-employed individuals and businesses with employees who drive as part of their job.
What you can claim
The VAT that a business reclaims is on the fuel portion of the mileage expense. The standard VAT rate is 25%. If you drive a car with a 1.6-litre engine, the applicable rate is 15p per mile. For the first 10,000 miles for vans and cars, you can claim up to £0.45 per mile, and then it's £0.25 per mile after that. This 45p is split into two parts: fuel and wear and tear. The fuel part is what a business owner can reclaim. If an employee can take extra passengers, the employer can claim an additional 5p per mile for each additional passenger.
How to claim
To claim VAT on mileage, you must keep accurate and updated logs of business travel. This should include the date, start and end destinations, mileage travelled, and reason for the journey. You will also need to keep fuel receipts for all fuel purchases made for any business trips you wish to claim. These receipts must show VAT details—a credit card statement alone won't suffice. HMRC recommends holding onto these receipts for four years, as they may ask to see evidence regarding your VAT returns. It's important to note that VAT can only be reclaimed on fuel for business use, so having VAT invoices from petrol stations is essential.
Who can claim
If you are a sole trader, there is no legal difference between you and your business, so you are not classed as an employee and are not eligible to reclaim VAT. If your business is not VAT-registered, you cannot reclaim VAT on anything, including mileage. Your trip must be 100% work-related.
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Claiming for passengers
If you use your own vehicle for business purposes, you can claim tax relief on the money spent on fuel and electricity. This can be done through your annual Self Assessment tax return. The exact amount you can claim depends on how much you travel for business.
If you are claiming for passengers, the driver can claim an additional 5p per mile for each qualifying passenger. To qualify, each of the passengers must be employed by, or be an officer of, the business. This means that if five members of staff travelled together for business purposes, 65p per mile could be claimed (45p for the driver plus 4 x 5p per mile for each passenger).
The business mileage rate covers expenditures such as fuel and MOTs, so you cannot claim these costs separately. If you use a company car for business travel, you can claim the amount spent on fuel and electricity, providing accurate records are kept.
If your employer reimburses some of the money, you can claim relief on the difference. You must send HM Revenue and Customs (HMRC) copies of your mileage logs when you claim.
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Frequently asked questions
If you are using your own vehicle for business purposes, you can claim 45p per mile for the first 10,000 miles and 25p per mile after that. This is called the mileage allowance and it covers fuel as well as other costs such as insurance and repairs.
A business trip is travel between your permanent workplace and a temporary work location, such as visiting a client. It can also include travelling from home to another workplace if "home" is your permanent workplace due to the requirements of the job. Commuting from home to your usual workplace does not count as a business trip.
If you are self-employed, you can calculate your vehicle expenses using a flat rate for mileage when you do your Self Assessment tax return. If you are an employee, your employer may reimburse you for your mileage costs, in which case you can claim tax relief on the difference if they do not cover the full 45p/25p rate.
If you are a passenger travelling with other employees in someone else's car on a business trip, you can claim 5p per passenger per mile.
If you drive an electric car, you can claim the full amount that's available to you, which is 45p for the first 10,000 miles and 25p per mile after that.
