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When you’re self-employed, either as a sole trader or the director of your own limited company, claiming back business mileage is a bit of a no-brainer; as an allowable business expense, claiming business mileage means you can reduce the amount of tax you need to pay.
Recording your business mileage and understanding the records you need to keep can be a challenge for many new business owners, but it doesn’t have to be.
In this article, we’ll be taking a look at what business mileage is, what the current HMRC mileage rates are, and how to make a mileage claim, as well as giving you free ways to track and claim business mileage.
Business mileage is an important – but often overlooked – expense for sole traders, contractors, and directors employed by their limited companies.
Business mileage covers the miles you travel for business purposes, such as travelling to a client. You must only claim for journeys that are “wholly and exclusively” for business purposes – your daily commute or any personal trips taken in your vehicle don’t count!
Business mileage is an expense which reduces your company or sole trade profits, and therefore the amount of tax you pay at the end of the year. In short, claiming business miles is good news for you and your business.
Both company directors and self-employed sole traders can claim. If you have an employee, they would be able to claim from you as their employer. If you don’t pay them business mileage, or you pay them less than the HMRC approved mileage rates, they can make a claim to HMRC at the end of the tax year for the difference.
It’s usually best to claim back your mileage using the HMRC approved mileage allowance payments (AMAP rates on Gov.uk). The AMAP rates include the general running costs of your car like maintenance and insurance.
Here are the current HMRC business mileage rates for cars, vans, motorcycles, and bikes:
Mode of transport
First 10,000 miles
Over 10,000 miles
*Only limited companies can claim mileage for bikes – not sole traders
HMRC do not allow business mileage to be claimed by sole traders using a bicycle, which is rather unfortunate for those green-minded among you, or even cycle couriers. However, you may be able to claim the costs of buying a bicycle for work and consumables such as tyres or maintenance. Any personal use of the bicycle is likely to reduce the amount you can claim. It’s best to speak to an accountant or your local tax office to confirm what you can claim.
It’s important to keep a record of all business journeys you make as evidence to support any claim you make.
Fortunately, it’s a pretty simple process. To ensure that you can claim back mileage as a sole trader, director, or for your employees, the following records should be kept:
The easiest way to record your journeys and work out how much you can claim is on a business mileage claim spreadsheet – ours is free and easy to use! Simply sign up to Crunch Chorus, our free self-employed community and you can download our easy to use mileage spreadsheet for the current and previous tax years that will record and calculate your business mileage in a professional format, making it easy to claim back. We recommend you establish a system of regularly recording expense claims and being paid back your costs from your business, perhaps on a monthly basis.
An HMRC inspection will involve checking that your entire expense claim system is fit for purpose. This means relevant receipts are retained to support corresponding claims, and the amount of expenses recorded in your company accounts or sole trader records match the amount claimed – so it’s important you keep all relevant records whether it’s for you as the company director, a sole trader or an employee claiming mileage.
It is often the way that, as a brand new business, you’ll have expenses to pay before you’ve earned any money for the company. There are two possible options here regarding business expense claims:
Wait until the business has generated the necessary income and then claim
Introduce your own working capital into your business and then you can pay yourself back. It sounds a bit like robbing Peter to pay Paul, but the input of capital shows in the company accounts as a loan from the director to the company or as capital introduced by the sole trader to their business.
HMRC Advisory Fuel Rates are the recommended amounts when you are reclaiming the fuel element on business mileage in a company car. HMRC reviews these rates every quarter.
These rates only apply to Standard Rate VAT registered companies. They’re used to calculate:
From 1st March 2021, the Advisory Fuel rates are:
|1,400cc or less||10p||7p||4p|
|1,600cc or less||9p||4p|
|1,401cc – 2,000cc||12p||8p||4p|
|1,601cc to 2,000.cc||11p||4p|
* Fully electric cars only. Hybrid cars claim at the petrol or diesel rate. Electricity is not classed as a fuel for car fuel benefit purposes.
You can find previous rates at the Gov.uk website Advisory Fuel Rates page.
Using the advisory fuel rates above, you can calculate what percentage of the business mileage rate applies to fuel and calculate the VAT on that element. We have a Crunch Advisory Fuel Rates Spreadsheet that calculates the amounts for you.
Example One – reclaiming VAT on mileage
Jane bought petrol and travelled 100 miles in her own car with an engine capacity of 2500cc.
Based on an advisory rate of 18p per mile, £18 would be attributed to the fuel (out of the overall £45 mileage claim). As this £18 is VAT inclusive (that is, £18 equals 120% of the fuel cost), the VAT element is calculated by dividing the figure by 6 giving an amount of £3.00.
Example Two – paying employer for private fuel on a company car
Jack made a round trip of 50 miles to see relatives in a diesel-engined company car with 1600cc capacity.
50 miles at an advisory rate of 9p per mile means Jack will be required to pay £4.50 for the personal trip.
Example Three – claiming mileage on a company car
Helen bought diesel for her company car with an engine capacity of 1650cc, travelling 300 miles for work.
300 miles at an advisory rate of 11p per mile means the employer will reimburse Helen £33 for business miles.
Whether you’re on the road every day or just make the occasional business trip, it pays to keep track of your mileage – you’ll reduce your tax bill and end up with more money in your pocket.
The good news is that this just got a whole lot easier. All limited companies using Crunch Accounting can now use Tripcatcher to accurately record and monitor their business mileage – at no extra cost. By integrating directly with your Crunch account, Tripcatcher does all the hard work for you.
You can log mileage via the Tripcatcher web app, but there’s also a fantastic mobile app available for iPhones/iPads and Android devices – great for recording mileage on the go.
Cut down on data entry
We think you’ll love Tripcatcher. It includes loads of great time-saving features, including the ability to create recurring trips if you travel between the same location over a set period of time. Simply enter the route and which days you made the journey – Tripcatcher will do the rest.
Claim the correct mileage
Not sure how far you’ve travelled? Simply bash in the ‘to’ and ‘from’ postcodes – Tripcatcher will then use Google Maps to plot the route and work out the mileage. If you’re using the mobile app, you can enable GPS tracking to automate the whole process.
Get started today
Can’t wait to get started? Head over to your Crunch account, go to the ‘Subscription’ section under ‘Your Account’ and find the Tripcatcher tile. Under Tripcatcher, select ‘Activate’. You’ll just need to create a password for Tripcatcher (the email you use for Crunch will be pre-populated).
Don’t forget, Tripcatcher is free to all limited companies using Crunch Accounting, so you won’t have to pay a penny extra to use it.
If you choose not to use our free Tripcatcher you can still record your mileage in Crunch by following the business mileage instructions in our Crunch HelpCentre.
If you’re a Crunch limited company client, our Tripcatcher app is the best way to log record and upload business mileage to our system. If you’re not yet a Crunch client, the best way to record your business mileage on a day-to-day basis is with a business mileage expenses spreadsheet which, as luck would have it, you’ll find right here!
Finally, please note that there’s no prescribed, HMRC-approved mileage claim form template. You just need to give the information to the taxman in a consistent, well-presented way. For this reason, a standard expenses spreadsheet that logs all business mileage is always a good idea.