If you do any kind of driving for work, you may be able to claim mileage on your taxes for additional tax relief.
It’s important to know what kinds of driving and vehicles HMRC allows employees and those who are self-employed to deduct as business expenses. This guide can help you make sure you’re claiming mileage allowance properly and writing off your business mileage according to the latest rules.
Not only will this keep your books tight, but it will also ensure you get the most tax relief possible each year.
You’ll need to keep accurate records of your mileage allowance to claim tax relief, and people have been tracking their business mileage with pen and paper for decades.
But technology has advanced. There are now mileage tracker apps (like the FreshBooks mileage tracker) that let you record your business journeys with ease.
If you own your business and hire staff, it’s a good idea to have specific requirements in place for your employees’ mileage claims. Consider creating a mileage log template to share with your staff so they’re aware of what you’re expecting from their reports if they start tracking their mileage manually.
Let’s start by covering what the mileage rate actually is.
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What Is the Mileage Rate?
If you use your own vehicle for work, you can claim a business mileage allowance for any travelling you do for business purposes using HMRC’s approved mileage rates. This also covers the cost of owning and running your vehicle.
If you drive a car or van, you can claim 45p per mile for every mile you travel up to 10,000 miles. And you can claim 25p for every mile after that.
Let’s say your job requires you to dive 12,000 miles during the tax year. Using the approved business mileage rates, you can claim £4,500 for the first 10,000 miles and £500 for the 2,000 miles after that.
You can claim mileage tax relief for driving a motorcycle, too, but the rate is slightly lower than that of cars and vans at 24p before and after the 10,000 mile threshold. And for bicycles, the rate is 20p per mile too.
Using a Company Car
You can claim the electricity and fuel you use during business trips as part of your mileage allowance when using a company car. Remember to keep records of your business travel to support your claim. If your employer reimburses some of your costs, you can still claim tax relief for the difference.
Using Your Own Vehicle When Self-Employed
If you’re self-employed, you use traditional accounting or cash-basis accounting, and you buy a vehicle for your business, you can claim this purchase as a capital allowance.
However, if you use cash-basis accounting and buy a car, you can only claim this as a capital allowance if you’re not using simplified expenses. If you buy a van, you can treat this as a business expense.
Can I Claim VAT When I Claim Business Mileage?
If you own your business and are VAT-registered, you and your employees can claim VAT on top of your business mileage if you’re using the flat rate. But you’ll need to take HMRC’s advisory fuel rates into consideration. HMRC revises these rates on a quarterly basis, so don’t forget to check current advisory fuel rates when you’re making your calculations.
These rates only apply to company cars.
Travel and Overnight Expenses
You may also be able to claim business mileage tax relief on anything associated with travel and overnight expenses, such as:
- Public transport fares
- Hotel accommodation
- Food and drink
- Congestion charges and tolls
- Parking chargers
Again, all of these things work in your favour when you need to pay tax, by reducing the amount you pay.
HMRC defines a temporary workplace as somewhere you work for less than 24 months. You can claim tax relief on the time you spend travelling to a temporary workplace.
How Far Back Can I Claim Mileage?
You can backdate a mileage claim up to 4 tax years. Keeping tight records will make it easier to make a per-mile claim, and in the event of an audit, you can easily prove your mileage tax rebate claim with clear records.
How Can I Prove My Mileage
To work out how much you can claim each tax year, you’ll need to:
- Keep records of the dates and business mileage of your work journeys
- Add up the business mileage for each vehicle type you’ve used for work
- Deduct any amount your employer pays towards your costs—these are sometimes known as mileage allowance payments
Some of the best forms of evidence for proving your mileage include:
- The names and addresses of where you’ve travelled to for work purposes, with dates—this could be a diary or spreadsheet listing all the details of your business trips
- Payslips and statements confirming a mileage allowance and travel allowances that your employer has paid you for
- A contract that shows you have to travel to temporary workplaces as part of your job description
Of course, your individual circumstances will help you determine what records you need to submit to HMRC. If you don’t have payslips or statements, ask your employer for help.
Is There Anything I Can’t Claim?
You can’t claim for journeys between your home and a permanent workplace. HMRC defines a permanent workplace as anywhere you spend more than 40% of your time working. You also can’t make a claim for any non-business travel or any fines you receive while driving.
And as HMRC’s mileage rates cover the cost of owning and running your own vehicle, this means you can’t make separate claims for things like:
- Repairs and servicing
- Fuel costs
- Electricity costs
- Road tax
How to Claim for Mileage
To make a claim for mileage, you’ll need to complete a P87 form and send this to HMRC if you’re employed and the claim is less than £2,500. This form allows you to claim for other expenses, too, such as uniform costs and professional fees.
If your claim is above £2,500, you’ll need to complete a self-assessment tax return.
If you’re self-employed, you’ll need to add up your costs and include these in your self-assessment tax return, no matter what the total is.
Claim the Right Amount of Mileage
Some jobs require more driving than others. Whatever you do for a living, and whether you’re employed or self-employed, it’s always a good idea to keep track of how much driving you’re doing for work. The mileage adds up, and you can use this to prove to HMRC that they need to give you a lower tax bill (bigger tax refund).
So make sure you keep records, use an approved mileage rate, and claim mileage allowance and business travel expenses annually. Talk to your employer to see if they have a way for you to keep track of your mileage expenses. And if you aren’t sure of anything, it’s always worth speaking to an accountant or financial adviser. They can help you to deduct the right amount of mileage for your personal situation.
This post was updated in November 2023.