What is the mileage allowance?

If you want to avoid the time and effort required to record and work out the actual amounts you spent on fuel for journeys you make as a sole trader or landlord, as well as associated vehicle costs (eg maintenance, insurance, road tax, etc), you can claim mileage allowance.

Mileage allowance is a flat-rate tax expense scheme that provides sole traders and landlords with an easier way to claim tax expenses for business journeys made by vehicle. And even if you don’t drive a lot of business-related miles as a sole trader or landlord, you can still claim mileage allowance, which will lower your profit and resulting tax bill.

• Mileage allowance can only be claimed for journeys made “wholly and exclusively” for business/trade, whether as a sole trader or landlord.
• You cannot and should not claim mileage allowance for journeys made for personal reasons (eg doing your weekly shop). If you do and HMRC finds out, it can result in severe penalty payments.
• Sole traders cannot claim mileage allowance for journeys between their home and normal place of work. Like everyone else, they must pay their own commuting costs.
• If you travel between your home and a place of work that isn;t normal, for example, you’re a tradesperson and must travel to different customer locations, you can claim mileage allowance or actual costs.

Sole traders and landlords can claim mileage allowance of:

• 45p a business mile travelled in a car/van for the first 10,000 miles and
• 25p a business mile after 10,000 miles or
• 24p a mile if you use a motorbike.
• You can claim a further 5p per mile for each additional passenger, provided that they work for your business.

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 claiming mileage allowance for a vehicle, you can’t change to actual fuel and vehicle-related costs.

To claim mileage allowance, keep a detailed mileage record of your business/landlord-related vehicle journeys. When it comes time to fill in your Self Assessment tax return, add up all of the mileage you want to claim mileage allowance for and apply to relevant pence-per-mile that you’re allowed to claim. You summarise this within your tax return, as well as other allowable expenses you wish to claim.

If you do claim mileage allowance, you cannot claim for vehicle maintenance, insurance, road tax or fuel as allowable expenses, because these are accounted for within the mileage allowance. It covers fuel and all other vehicle-related costs.