What vehicle, travel, hotel and meal expenses can you claim when you’re self-employed?

While some self-employed people (AKA sole traders) work exclusively from home or premises and seldom travel for business, others rack up many miles on the road each year visiting customers and suppliers, often using their own vehicle.

Although travelling for business can take a lot of your time and energy, when using your own vehicle for business, at least you can claim legitimate travel costs as an allowable expense, which you deduct from your profits to lower your Income Tax bill.

What travel expenses can sole traders claim?

Sole traders can claim allowable expenses for:

• fuel
• vehicle insurance
• repairs and servicing
• MOTs
• parking, tolls, congestion charge
• vehicle hire costs
• vehicle licence fees
• breakdown cover and
• train, bus, air and taxi fares.

Sole traders can’t claim for:

• personal journeys and travel expenses
• speeding or parking fines
• travel between home and normal place of work.

You should retain receipts and invoices for all travel-related costs for which you intend to claim. There are apps that enable you to record receipts digitally using your smartphone. Try to ensure that all travel-related purchases are made using a debit or credit card, then you’ll have a record.

You can use one of two methods – total expenses or flat rate – to calculate your yearly travel expenses.

Sole trader vehicle allowances: total expenses

Using this method, you calculate all of your motoring costs for the year and work out what proportion/percentage resulted from business use, which you then claim as an allowable expense.

You’ll need to maintain a detailed record of your motoring expenses, including fuel, services, repairs, MOT, tyres, insurance, vehicle licence fees, breakdown cover, parking, and any congestion charges and toll payments.

You also need to keep a mileage record book, clearly detailing your business journeys (ie dates, destination, miles travelled and purpose). Alternatively, there are many “mileage-tracker” apps that have been created to help small businesses to reliably and conveniently record their mileage.

If you drive many business miles in your own vehicle, the total expenses method is probably best for you. Although it takes time and effort, it can ensure that you claim the full allowances to which you’re entitled.

Sole trader vehicle allowances: flat rate

Alternatively, you can use the flat-rate “simplified expenses” method when claiming your vehicle expenses, which can save you a lot of time and effort – and be more suitable if you don’t drive many business miles. The flat rate you receive covers all vehicle-related costs (as detailed earlier on).

For cars and vans, the flat rates are 45p per mile for the first 10,000 miles you drive in a year and then 25p for each subsequent mile. If you travel with others who work for your business (partners or employees), you can claim an additional 5p per mile for each extra passenger. If you use a motorbike, the flat rate is 24p per mile.

Again, you’re advised to keep a mileage log, although you may be able to provide an accurate estimate, for example, if business journeys demonstrably make up about half of your average weekly mileage, and you drive 10,000 miles a year, you claim the flat rate for 5,000 miles (x 45 = £2,250)

If you use more than one vehicle for business, you can claim a flat rate for one and total expenses for another. But once you choose the flat rate method, you must stick with it.

Sole trader allowances: accommodation and food

If you need to stay in a hotel overnight when travelling for business, your accommodation bill can be claimed as an allowable expense. Your hotel accommodation choice should be reasonable.

“Sustenance” is the name given to food and drink for those travelling for business. You can also claim for meals on overnight business trips, but, again, costs should be “reasonable” (forget about fine dining and expensive wines). If you decide to treat a client or supplier to dinner, you can’t claim it as an allowable expense.

Other food and drink costs incurred when you’re away from your normal business base during the day time, where no overnight stay is required, cannot be claimed as a tax-deductible expense, because (according to HMRC) we all need to eat to live, and so food and drink isn’t required “wholly and exclusively” for your business.

Sole trader allowances: How to report mileage

Good accounting software allows you to enter your business mileage and it calculates your mileage allowance for you, which you enter into your Self-Assessment tax return. With other software or your own spreadsheet, it requires more time and effort.

If you use simplified expenses to claim mileage allowance, you cannot also claim for motoring costs such as insurance, road tax or fuel, because these are accounted for within the flat-rate mileage allowance. If in any doubt about what you can claim, seek tailored advice from a qualified tax professional.

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.