Rajan Wilcox
If you use your own vehicle for business purposes, you may be able to claim a mileage allowance. The amount you can claim depends on whether you are self-employed or an employee. Self-employed individuals can claim a flat rate of 45p per business mile travelled in a car or van for the first 10,000 miles and 25p per mile thereafter. Employees who use their own cars for business journeys can claim tax relief on the approved mileage rate of 45p per mile for the first 10,000 miles and 25p per mile after that. It is important to note that you can only claim for business journeys and not personal ones.
| Characteristics | Values |
|---|---|
| Mileage allowance for self-employed | 45p per business mile travelled for the first 10,000 miles |
| Mileage allowance for employees | 45p per mile for the first 10,000 miles in the financial year and 25p per mile thereafter |
| Additional allowance for each extra passenger | 5p per mile |
| Additional allowance for each extra passenger from the same business | 5p per mile |
| Mileage allowance for company car | Advisory Fuel Rates (AFR) |
| VAT claim on fuel | 2.33p per mile for a 1401cc to 2000cc petrol car as of June 2018 |
| Mileage allowance for sole traders | 45p per mile for the first 10,000 miles and 25p per mile thereafter |
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What You'll Learn
Claiming mileage allowance when self-employed
If you're self-employed in the UK, you can claim a mileage allowance for the business use of your vehicle. This is separate from Advisory Fuel Rates (AFR), which are set by HMRC and can be claimed by limited companies that own a vehicle.
There are two ways to claim a mileage allowance: the flat-rate method (simplified expenses) and the actual cost method (direct expenses). The flat-rate method is a simpler way to claim back the cost of using your vehicle for business. It offers a fixed amount per business mile travelled and doesn't require detailed record-keeping. The flat rate for a car or van is 45p per business mile for the first 10,000 miles and 25p per business mile after that. For a motorbike, the rate is 24p per mile. You can also claim VAT on the fuel element of the mileage allowance.
The actual cost method requires you to keep a detailed record of your vehicle's associated costs, such as fuel receipts, repairs, and invoices. Once you have a total yearly cost, you calculate the percentage of usage that was for business and apply it to the total. This method may be more accurate, especially if you do a lot of business miles, but it is more time-consuming.
It's important to note that you can't claim mileage allowance for personal journeys or for travel between your home and usual place of work, as this is considered a commute. Mileage allowance is only for journeys "wholly and exclusively" for business purposes. You can also claim other business travel expenses, such as train tickets, taxi rides, parking tickets, and toll fees, separately from your mileage allowance.
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Claiming tax relief on fuel
If you use your own vehicle for business purposes, you can claim tax relief on the approved mileage rate. Employees cannot claim tax relief separately for owning and running costs like fuel and MOTs, as the business mileage rate covers these expenditures.
If you use your own car for business trips, you can claim some tax relief on the amount of fuel used. You can claim fuel expenses as a limited company through your corporation tax return, as a sole trader and self-employed individual through your Income Tax Self Assessment return. If you are VAT-registered, you can also claim back some VAT.
The mileage allowance is 45p per business mile travelled in a car or van for the first 10,000 miles and 25p per mile thereafter. This rate is designed to cover both fuel and wear and tear on your vehicle and is considered a simplified way to account for your motor and related expenses. If you take a passenger on a journey, these trips can claim an extra 5p per mile. This also requires the passenger to be an employee and travel for business.
If you use cash basis accounting, you can still claim this as a capital allowance, however, all other purchases for business should be claimed as an allowable expense, including fuel, parking, and overnight stays.
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Mileage allowance for sole traders
If you're a sole trader who uses your vehicle for business purposes, you can claim a mileage allowance to cover expenses like fuel, insurance, repairs, and general wear and tear. This is known as the Approved Mileage Allowance Payments (AMAPs). These are the fixed amounts per mile that you can claim without paying tax on them.
HMRC provides two methods for claiming mileage allowance:
- Flat per-mile rate (simplified expenses): This is a simpler solution that offers a set monetary value for each business mile travelled. For the first 10,000 miles, you can claim 45p per mile, and 25p for each mile thereafter. Electric vehicles get a flat rate of 45p per mile, regardless of total mileage.
- Actual vehicle costs (direct expenses): This method is more time-consuming but provides an accurate reading of your actual vehicle expenses. It involves recording all costs incurred from using your vehicle for business and deducting them from your company's taxable profit at the end of the tax year.
It's important to note that you cannot claim mileage allowance for personal journeys or for commuting between your home and usual place of work. Additionally, you cannot claim mileage allowance for a vehicle for which you've already claimed capital allowances.
To make the most of your mileage allowance, it's recommended to regularly record your total mileage, including both private and business trips, to accurately manage your claims.
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Claiming for fuel when using a company car
If you use a company car for business travel, you can claim the cost of fuel and electricity, as long as you keep accurate records. The current tax-free approved mileage allowance is 45p per mile for the first 10,000 miles in the financial year and 25p per mile thereafter. If your employer reimburses you for mileage costs, these payments are called 'Mileage Allowance Payments' (MAPs).
If your employer does not reimburse you for mileage costs, you can claim tax relief through your Self Assessment tax return. If you travel with fellow team members from the same business, the driver can claim an additional 5p per mile for each qualifying passenger. To qualify, each passenger must be employed by the business. This means that, if five people travel together, the driver could claim 65p per mile (45p for the driver plus 4 x 5p per mile for each passenger).
If you use a company pool car, you may be expected to refill the car before returning it. In this case, you can claim fuel costs by submitting fuel receipts to your employer. However, it is important to ensure that the fuel receipts match the amount of fuel put into the company car.
If you are self-employed, you can choose to use a flat-rate mileage allowance to make tax administration quicker and easier. This covers all vehicle costs, including fuel, and you will only need to record your business mileage. You won't be able to choose the simplified option if you have claimed capital allowance for your vehicle or included it in your business expenses.
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Claiming mileage allowance for business journeys
If you're using your own car for business journeys, you can claim a tax-free mileage allowance of 45p per mile for the first 10,000 business miles in a year and then 25p per mile thereafter. This is known as the Mileage Allowance Payment (MAP). If your employer reimburses you at a lower rate, you can claim the additional amount as a deduction from your taxable income. For example, if your employer reimburses you at 35p per mile, you can claim an additional 10p per mile as tax relief.
To claim the mileage allowance, you need to keep accurate records of your business mileage and mileage allowance payments received throughout the year. You can use HMRC's interactive calculator to work out your mileage allowance relief. If you haven't received any allowance payments from your employer, you can claim mileage tax relief at the end of the tax year.
If you're travelling with fellow employees in your car or van on business journeys, you can claim an additional 5p per passenger per mile. This only applies if the passengers are also on a work journey, and there is no relief if you receive less than 5p or nothing at all.
If you're using a company car for business journeys, you can claim tax relief on the fuel and electricity costs, provided you keep accurate records. In this case, your mileage allowance is based solely on the fuel you're buying and is called the Advisory Fuel Rate (AFR). Company car mileage rates are revised every three months, and the AFR is determined by the size of your engine and the type of fuel you're buying.
It's important to note that if you're getting any private use of the car, you may be taxed on it, and the same goes for any subsidised or free fuel you receive.
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Frequently asked questions
As a sole trader, you can claim a mileage allowance of 45p per business mile travelled in a car or van for the first 10,000 miles. After that, the rate changes to 25p per mile. This is intended to cover all vehicle costs, including fuel, so you cannot claim fuel as a separate expense.
If you use your own car for business journeys, you can claim 45p per mile tax-free as a business mileage allowance. This covers fuel and other running costs. For additional passengers from the same business, you can claim an extra 5p per mile per passenger.
If you use a company car for business travel, you can claim the cost of fuel and electricity, but you must keep accurate records. You can only claim for the amount not covered by your employer.
