Mileage allowance: how much can sole traders claim?

Sole traders (ie self-employed workers) can rack up many thousands of miles a year when travelling around on work journeys, be it visiting customers, clients, suppliers or others. Costs can be significant. As well as fuel,…

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Last Updated: 5th July 2022   |   Created: 2nd February 2022

Sole traders (ie self-employed workers) can rack up many thousands of miles a year when travelling around on work journeys, be it visiting customers, clients, suppliers or others. Costs can be significant. As well as fuel, which in October 2021 rose to its highest price in a decade, there are repairs, maintenance, insurance and other vehicle costs to pay for.

Fortunately, sole traders can claim allowable expenses for these and if you don’t want to keep track of actual costs, HMRC allows you to claim mileage allowance, a flat-rate scheme that offers a much simpler way of claiming for business journeys made by road. Even if you drive relatively few miles, you may still be able to claim mileage allowance, which lowers your profit and resulting tax bill.

Mileage allowance: what are the rules?

Journeys must be “wholly and exclusively” for business if you are to claim mileage allowance. You can’t claim mileage allowance for personal journeys; do so knowingly and it’s fraud and tax evasion, which can have serious consequences.

Neither can you claim mileage allowance for journeys between your home and usual place of work, because this is considered simply to be your commute, which others have to pay out of their own pocket. You can claim for travel between your home and a temporary place of work, for example, if you’re a painter and decorator or mobile hairdresser who regularly travels to jobs in different locations.

Need to know!

  • You cannot claim mileage allowance for a vehicle for which you’ve already claimed capital allowances.

Mileage allowance: how much can you claim?

Sole traders can claim a mileage allowance of:

  • 45p a business mile travelled in a car/van for the first 10,000 miles and
  • 25p a business mile thereafter or
  • 24p a mile if you use your motorbike for business journeys.

If you use two vehicles for your business, you can claim the actual cost for one and mileage allowance for the other, but once you start using the mileage allowance for a vehicle, you can’t change.

Need to know!

  • You can claim a further 5p per mile for each additional passenger as long as they work for your business. So, for one extra passenger, for example, that’s 45p + 5p per mile for the first 10,000 miles and 25p + 5p (30p) for each mile travelled over and above 10,000.

Mileage allowance: how do I track my mileage?

Things will be much easier if you log every business journey (ie miles travelled, date, location and customer). Then, working out your total claimable mileage when filing in your tax return will be much quicker, while your figures will likely be more accurate and provable (HMRC can ask for proof to support your mileage claim).

If you’re going to write down your mileage, do it into a notebook that you keep safe. A better option is to use a spreadsheet or better still a mileage-expense app, so that data is safely stored online. Some mileage expense apps are/can be linked to accounting software, which makes recording and reporting business mileage much simpler.   

Some self-employed business owners estimate their business mileage, by claiming for a percentage of their vehicle’s total annual mileage. So, for example, if your car does 500 miles a month and you can show that half of that is for business use, you can claim mileage allowance of 3,000 miles a year (ie 3,000 x 45p = £1,350).

How do I claim mileage allowance?

Once you’ve worked out your total business mileage and how much mileage allowance you can claim, you simply add this figure to other allowable expenses you wish to claim and detail them in your Self Assessment tax return (SA100). HMRC will take these away from your profits and take into account any reliefs you’re also allowed to claim.

Need to know!

  • If you claim mileage allowance, you cannot also claim vehicle maintenance, insurance, road tax or fuel as allowable expenses, because they’re accounted for within the mileage allowance.

What records or proof should I keep?

You must keep records of all your business expenses as proof of your costs, which means all travel-related sales invoices and receipts. File these in an organised way after recording individual costs in your accounting software/financial records.

You don’t have to send in proof of expenses when you submit your tax return, but HMRC can ask you to provide evidence of claims you make for allowances, so retain proof and maintain accurate records so you can show them on demand.

What vehicle-related costs can’t I claim for?

Claiming mileage allowance doesn’t mean you cannot claim for other business travel expenses, such as train tickets and taxi rides. Parking tickets and toll fees you must pay for while on business can also be claimed as a legitimate business expense. However, you cannot claim speeding or parking fines as an allowable expense. And as previously stated, you must not claim mileage expenses for personal journeys or journeys to and from your usual place of work.

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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.

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