Mercedes Mullins
If you use your own vehicle for work-related trips, you may be able to claim fuel expenses on your tax return. The rules and methods for claiming these expenses vary by country and individual circumstances, so it is important to consult official government sources for the most accurate and up-to-date information. Generally, you can claim fuel expenses as a limited company through your corporation tax return or as a sole trader/self-employed individual through your income tax self-assessment return. In some cases, you may also be able to claim back VAT on fuel expenses. To calculate your fuel expenses, you may need to keep records of your odometer readings, fuel receipts, and the distance travelled for work-related trips.
How much fuel expenses can I claim?
| Characteristics | Values |
|---|---|
| Who can claim? | Limited companies, sole traders, self-employed individuals, contractors, and directors of limited companies |
| Type of vehicle | Any vehicle, including cars, trucks, and motorcycles |
| Type of expense | Fuel expenses, running costs, and decline in value of the vehicle |
| Record-keeping | Keep records of dates, purpose, starting and destination points, and total miles covered for business travel. Keep receipts for fuel purchases and other expenses. |
| Calculation methods | Multiply work-related kilometres by the rate per kilometre for that income year, or use the logbook method to record distance travelled, business/personal usage split, and fuel and oil costs |
| Additional considerations | Only claim mileage for business trips. If taking a passenger on a journey, claim an extra 5p per mile. |
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What You'll Learn
Claiming fuel expenses as a limited company
As a limited company, you can claim fuel expenses for business travel. This applies whether you're using your own car for business trips or your company owns the vehicle. If your company owns the vehicle, you can claim all expenses related to it, including fuel, repairs, road tax, insurance, and other costs. However, if the vehicle is used for both business and personal travel, it may be considered a benefit-in-kind, triggering extra tax for both the company and the individual.
If you use your own vehicle for business purposes, you can claim fuel expenses through mileage claims. You must keep a log of all business miles travelled and can claim up to 45p per mile (plus an extra 5p for journeys with a passenger). This rate covers fuel, wear and tear, and general running costs. Mileage claims are a tax-free reimbursement for the individual and a tax-deductible business expense for the company.
To qualify for tax relief on fuel expenses, the journey must be made wholly, exclusively, and necessarily for business purposes. Personal or commuting travel does not qualify. It's important to maintain proper records and understand allowable expenses to reduce your company's tax liability and ensure compliance with HMRC guidelines.
In addition to fuel expenses, limited companies can claim a range of other business expenses, such as office costs, travel, equipment, professional fees, and staff expenses. These expenses must also be incurred wholly and exclusively for business purposes to be tax-deductible. Understanding what qualifies as a tax-deductible expense is crucial for maintaining tax efficiency and compliance.
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Claiming as a sole trader or self-employed individual
As a sole trader or self-employed individual, you can claim fuel expenses for business-related journeys. It is important to note that you cannot claim fuel expenses for personal journeys, and doing so is considered fraud.
There are two methods to calculate your fuel expenses: mileage claims and actual cost. Mileage claims are the simpler method, where you keep track of your business mileage and use the HMRC-approved rate when making your claim. With actual cost, you need to track all your vehicle expenses, including fuel, maintenance, insurance, and MOT, and then record which mileage is for business and which is for personal use.
If you use a vehicle for both business and personal reasons, you need to calculate the proportion of costs for business use and claim only that amount. You can use a good fuel card to automatically track your mileage and costs, making it easier to claim back business expenses at the end of the month.
To claim an expense, you must have a record of that expense, such as a receipt or invoice, and keep these records for at least seven years. You can also use digital records by photographing your receipts and keeping them with your other records, but it is recommended to keep paper copies as well.
Additionally, you can claim other vehicle-related expenses such as repairs, tyres, windscreens, servicing, MOTs, vehicle insurance, road tax, and breakdown cover if the vehicle is used solely for business.
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Calculating work-related kilometres
When it comes to calculating work-related kilometres for fuel expense claims, there are a few methods that can be used, depending on the individual's employment status and vehicle type. Here is a detailed breakdown:
Cents Per Kilometre Method
The simplest method for calculating work-related kilometres is the cents per kilometre method, which is set by the Australian Taxation Office (ATO). This method is suitable for self-employed individuals, sole traders, and partnerships claiming deductions for a car. All one needs to do is track the number of kilometres driven for work throughout the year and multiply them by the corresponding year's cents per kilometre rate. For example, the rate for the 2024/2025 tax year is 88 cents per kilometre. It's important to note that with this method, you can claim up to 5,000 kilometres per year.
Logbook Method
The logbook method allows individuals to claim business travel expenses without an upper limit in kilometres, as long as they are business-related. This method is more involved than the cents per kilometre method and is intended for sole traders or partnerships claiming deductions for a car. To use the logbook method, one must keep a logbook of work-related trips for a continuous period of at least 12 weeks. The logbook should include the destination and purpose of each journey, odometer readings at the start and end, and total kilometres travelled. It is valid for up to five income years, but a new logbook is required if circumstances change significantly.
Actual Expenses Method
The actual expenses method is suitable for companies and trusts, as well as sole traders and partnerships claiming expenses for vehicles other than cars. This method requires individuals to keep receipts of all vehicle-related expenses and the annual number of kilometres driven. A logbook must be maintained to record all driving, and if the vehicle is used for both business and private purposes, the percentage of business use must be calculated. This is done by dividing the number of business kilometres by the total kilometres driven and then multiplying by 100.
Electric Vehicle (EV) Home Charging Rate
For those with electric or hybrid vehicles, the EV home charging rate can be used to calculate the cost of charging their vehicles at home. This involves multiplying the home charging kilometres by the EV home charging rate. Additionally, individuals can claim commercial charging station costs by adjusting the total number of relevant kilometres by the home charging percentage and then multiplying by the EV rate. It is important to keep records, such as evidence of electricity costs and odometer readings.
It's important to note that the rules and rates may vary depending on the individual's location and tax regulations. The information provided here is based on the sources available and may not cover all specific cases or jurisdictions.
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Keeping records of fuel expenses
Record-Keeping Methods
Firstly, it's important to note that you must keep records for five years, as these may be requested during an audit. One way to simplify the process is to use specialist mileage tracking tools, which can automatically keep records and calculate claims. However, if you prefer to do it manually, you can use the logbook method, which involves keeping a 12-week logbook.
Information to Record
For each business trip, record the following information:
- The dates of travel
- The purpose of the journey
- The starting and destination points
- The total miles covered
- The distance travelled
- The business/personal usage split
- Fuel and oil costs, including odometer readings for the start and end of the trip
- Any other car expenses, such as registration, insurance, lease payments, services, repairs, etc.
Calculating Deductions
There are different methods to calculate deductions for car expenses. One way is to multiply the number of work-related kilometres travelled by the rate per kilometre for that income year. You can also calculate the business-use portion of your automotive expenses, including fuel, by dividing the expenses between personal and business use based on the miles driven.
VAT and Other Considerations
If you are VAT-registered, you can claim back some VAT on fuel expenses. Additionally, if you take a passenger on a business journey, you can claim an extra 5p per mile, provided the passenger is also an employee. Finally, if you receive an allowance from your employer for car expenses, remember to include this as assessable income in your tax return.
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Claiming for fuel expenses with passengers
When claiming fuel expenses for work-related travel, you can also claim an additional 5 pence per mile for each additional employee passenger travelling with you for business purposes. This is in addition to the standard rate per mile for claiming fuel expenses.
To claim fuel expenses, you must keep a record of your business usage. This includes a log of the dates when any business travel took place, the purpose of the journey, the starting and destination points, and the total miles covered. You will also need receipts for any fuel purchases. While the HMRC won't ask you to submit all this information every year, you must keep these records for five years in case of an audit.
If you are claiming fuel expenses for more than one car, you don't need to use the same method for each car. You can also change the method you use in different income years for the same car.
It is important to note that you cannot claim fuel expenses for travel between your home and place of work, except in limited circumstances. The trip must be for a business purpose, and you must have spent the money yourself without reimbursement. If your travel is partly private, you can only claim a deduction for the work-related portion of your expenses.
In the UK, if you are using a company car and your employer does not reimburse you for your business mileage, you should calculate your mileage costs for a tax relief claim based on the actual cost rather than the advisory fuel rates. For example, if a tank of petrol costs you £60 and you travelled 50% of that distance for business, you should claim tax relief on £30, rather than the number of business miles you have done at the relevant rate.
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Frequently asked questions
You can claim fuel expenses as a self-employed individual through your Income Tax Self Assessment return. You can also claim a VAT refund if you are VAT-registered.
There are a few ways to calculate your fuel expense. One way is to divide the expenses between personal and business use based on the miles driven. Another way is to use a flat rate for mileage instead of the actual costs of fuel.
You need to keep receipts for your fuel expenses and records of your work travel. If you are claiming expenses for more than one car, you can use a different method for each car.
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