Claiming Car Mileage Allowance

Claiming car mileage allowance is a common source of head-scratching – how do you figure out what is eligible? Other questions you’ll be wondering will likely include: ‘what is the HMRC mileage allowance?’, ‘what is the self-employed mileage allowance?’, and ‘how do you go about claiming business travel expenses?’

So you don’t submit your Self Assessment tax return without thorough knowledge on the best and most accurate way to claim car mileage, we’ve simplified everything you’ll need to know about the business vehicle tax deductions and tax reliefs.

How Much Can You Claim for Mileage?

You can claim over 45p tax-free as a business mileage allowance if you use your own car for a business journey.

UK mileage rates can differ, however, HMRC advisory fuel rates state that in most circumstances you can claim business mileage at a rate of 45p per mile for the first 10,000 business miles in a year and then 25p per mile thereafter.

If your employer pays you back, but will only reimburse you at 35p per mile then you can claim the additional amount as a deduction from your taxable income from HMRC through your tax return.

Also, if you travel with two or more people from the same business, the driver can claim an additional 5p per mile passenger rate for each qualifying passenger. Hooray!

So, if 5 of you travel together, you could claim 65p per mile (45p for the driver plus 4 x 5p per mile for each passenger). To qualify, each of the passengers must be employed by, or be an officer of the business.

What are the Car Mileage Allowance Rates for 2023 in the UK?

Employees that use their own car for business journeys can claim tax relief on the approved mileage rate. They can’t claim separately for owning and running costs like fuel and MOTs, as the business mileage rate covers these expenditures. If they instead use a company car for business travel, they can claim on what they’ve spent on fuel and electricity, providing accurate records are kept.

45p per mile is the tax-free approved mileage allowance for the first 10,000 miles in the financial year – it’s 25p per mile thereafter. If a business chooses to pay employees an amount towards the mileage costs, these reimbursements are called ‘Mileage Allowance Payments’ (MAPs). If not, employees can claim tax relief through their Self Assessment tax return.

For an employee who travels with any fellow team members from the same business, the driver can claim tax relief. They can claim an additional 5p per mile passenger rate for each qualifying passenger. So, 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).

What is the Self Employed Mileage Allowance?

The answer to this depends upon whether you use simplified expenses or not. If so, then the rates are also 45p for the first 10,000 miles, and 25p for any over this. Simplified expenses can be used by sole traders and business partnerships that don’t involve a limited company. If you’ve already claimed capital allowance for the car in question, then you wouldn’t be able to use simplified expenses.

If you’re unable to use them or choose not to, then they’ll need to be calculated differently. This will affect how you claim on it. As you’re self-employed, you wouldn’t take MAPs into account, but claim the entirety of your business mileage as tax relief on your Self Assessment tax return.

How Do You Go about Claiming Mileage Allowance?

The self employed should multiply the number of miles by the flat rate, and claim on the total of this. If you don’t use flat rates, instead you’ll claim on the overall figure for the costs involved in purchasing and running the car, like fuel and insurance.

For employees claiming mileage, the business mileage allowance is calculated by multiplying the miles in each year by the specific rate per mile. Let’s take a look at this in practice with a hypothetical scenario.

• The total business miles travelled by an employee is 11,500.
• The maximum claim is 10,000 miles at 45p, and 1,500 at 25p – for a total of £4,875.
• The employer reimburses at 15p per mile for a total of £1,725 (11,500 at 15p).
• The employee can therefore claim tax relief on £4,875 (the maximum tax-free payment available) less £1,725 (amount employer pays) = £3,150.
• If employees pay tax at the basic rate, they can claim a refund of £630 (at 20%); or £1,260 if they are a higher-rate taxpayer (40%).

Can I Claim VAT on Mileage?

You can – but not on the whole amount.

If you paid for car fuel for a company car and had to reclaim business mileage from your employer, HMRC has a list of Advisory Fuel Rates (AFR). These are regularly reviewed and amended, so check back to see if there have been any updates at the beginning of March, June, September and December.

The 45p/25p per mile tax-free mileage allowance can be used to cover things other than fuel, including running costs such as insurance and repairs. The portion used for fuel is subject to AFR, which you can claim VAT back on.

To determine how much you could claim, work out how much of the mileage allowance would be used for fuel. As of June 2018, a 1401cc to 2000cc petrol car would have an AFR of 14p per mile. You then multiply this by 0.166 (20 (% VAT) divided by 120 (100% plus 20%)) to figure out the pence per mile – in this case 2.33p. For each mile you pay, this is the amount that you can claim back in VAT.

Make sure that you retain your VAT receipts as HMRC can request to see that they have enough VAT to cover the amount you wish to claim.

Can I Claim a Van as a Business Expense?

You can claim the cost of buying a van as an allowable business expense if you’re self employed. This will deduct some of the costs of your taxable profit, but how you do this depends on how you pay your taxes.

If you use traditional accounting, you can claim capital allowances when you buy a business vehicle outright, for example, a car or van.

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: fuel, parking, overnight stays, etc.

Is There an Easier Way to Claim Car Mileage Allowance?

Calculating car mileage can prove difficult for those who aren’t tax experts, especially if you don’t use simplified mileage expenses. The team at GoSimpleTax are committed to making your tax experience as trouble-free as possible.

Our tax return software works out the sums for you so that you can pay tax with ease. And when there are savings to be made, we’ll tell you about it with our tax-saving suggestions. It can also be accessed from any device, including smartphones, so you can keep on top of your tax on the go. This is particularly beneficial if you need to keep track of your mileage.

Claiming car mileage allowance and business travel expenses is just one of the many areas in which our Self Assessment software can help. To discover the benefits first-hand, try GoSimpleTax for free trial today.

Our Mileage allowance: how much can sole traders claim article may be of interest.

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.