Business travel is often an important factor for any company that’s growing and visiting new customers and suppliers. There are a whole range of tax benefits associated with business travel, especially when using a car or van.
The HMRC tax office sets mileage rates that are the basis of the tax deductions you can claim for your mileage expenses. Understanding and utilizing these rates can help you unlock tax benefits while ensuring you stay compliant with HMRC regulations.
HMRC mileage rates
The HMRC mileage rates vary depending on the type of vehicle you use for your business travels. The rates are categorized into different tiers: cars and vans, motorcycles, and bicycles. Each category has its own set of rates per mile, and it’s important to familiarize yourself with these rates to accurately calculate your mileage expenses.
|From tax year 2011 to 2012 onwards||First 10,000 business miles in the tax year||Each business mile over 10,000 in the tax year|
|Cars and vans||45p||25p|
HMRC Approved mileage rates view the gov.uk website
Cars and vans
For cars and vans, the current HMRC mileage rates are as follows:
- Up to 10,000 miles: 45p per mile
- Over 10,000 miles: 25p per mile
Motorcycles and bicycles
Motorcycles have a fixed rate of 24p per mile, while bicycles have a rate of 20p per mile. It’s worth noting that these rates are subject to change, so it’s essential to regularly check the HMRC website for any updates.
Types of journey
When it comes to the types of journeys, there are two main categories: business journeys and personal journeys. Business journeys include travel between different work locations, client visits, and any other trips directly related to your business activities. On the other hand, personal journeys are considered non-business and are not eligible for tax deductions.
How to calculate your mileage expenses using HMRC rates
Calculating your mileage expenses using the HMRC rates is a straightforward two-step process.
Start by keeping a detailed record of your business journeys, including the date, destination, purpose, and distance travelled then multiply the total miles by the applicable HMRC rate for your vehicle type.
For example, if you travelled 100 miles for a business journey using your car, and the current rate is 45p per mile, your mileage expenses would amount to £45 (100 miles x 45p).
It’s important to remember that you can only claim mileage expenses for business journeys, so make sure to keep track of your personal and business mileage separately.
Understanding mileage allowance payments (MAPs) and how they can benefit your business
Mileage Allowance Payments (MAPs) are an alternative method of reimbursing employees for their business mileage. Instead of calculating and reimbursing actual expenses, businesses can choose to pay their employees a set rate per mile travelled. The advantage of MAPs is that they are tax-free up to certain limits set by HMRC.
For cars and vans, the current MAP rates are:
- Up to 10,000 miles: 45p per mile
- Over 10,000 miles: 25p per mile
By opting for MAPs, businesses can simplify their mileage reimbursement process and provide a tax-free benefit to their employees. However, it’s important to carefully consider whether MAPs or claiming actual expenses would be more beneficial for your business, taking into account factors such as the number of business miles travelled and the overall cost of vehicle ownership.
Claiming mileage expenses as tax deductions
For small businesses, claiming mileage expenses as tax deductions can be a valuable way to reduce the overall tax liability. When you use your personal vehicle for business purposes, you can claim a portion of the vehicle’s running costs as a tax deduction. This includes fuel, maintenance, insurance, and other related expenses.
To claim mileage expenses as tax deductions, you need to keep accurate records of your business journeys, along with the associated expenses. This documentation will serve as evidence to support your claims and ensure compliance with HMRC requirements.
As already noted, it’s important to note that you can only claim the portion of expenses that relates to business use, so it’s essential to keep detailed records and separate personal and business mileage. Here are some key record-keeping requirements to keep in mind:
- Date and purpose of the journey: Every business journey should be recorded with the date and a brief description of the purpose. This will help establish its business relevance.
- Distance travelled: It’s important to accurately record the distance travelled for each business journey. This can be done using a mileage logbook or a mileage tracking app.
- Receipts and invoices: Keep all fuel receipts, repair invoices, insurance documents, and any other relevant paperwork to support your mileage expense claims.
- Business vs. personal mileage: Clearly distinguish between personal and business mileage to avoid any confusion or potential audit issues.
By maintaining comprehensive records and organizing your documentation, you’ll be well-prepared to claim mileage expenses as tax deductions and demonstrate compliance with HMRC regulations.
Tips for maximizing your tax benefits
While understanding and utilizing HMRC mileage rates is essential, there are several additional tips and strategies you can employ to maximize your tax benefits. Here are some key considerations:
- Plan your journeys efficiently: Try to optimize your routes and combine multiple business activities in one trip to minimize unnecessary mileage.
- Explore alternative transportation options: Consider using public transport or car-sharing services for certain business journeys to reduce mileage expenses.
- Keep up with HMRC updates: HMRC mileage rates and regulations can change over time, so it’s important to stay informed to ensure you’re maximizing your tax benefits.
- Consult with a tax professional: If you’re unsure about any aspect of claiming mileage expenses or need assistance with tax planning, consider consulting with a qualified tax professional who can provide expert guidance tailored to your specific situation.
By implementing these strategies, you can not only maximize your tax benefits but also streamline your business travels and improve overall efficiency.
Common questions about mileage expenses
While claiming mileage expenses can be beneficial, there are common misconceptions and pitfalls that you should be aware of to avoid potential issues. Here are a few to keep in mind:
- Incorrect categorization of journeys: Ensure that you accurately classify your journeys as either business or personal to avoid claiming expenses for non-business mileage.
- Inadequate record-keeping: Failing to maintain detailed records and supporting documentation can result in rejected claims or potential audits. Make sure to stay organized and keep track of all relevant information.
- Overclaiming expenses: Be cautious not to overclaim your mileage expenses. Only claim the portion that is directly related to business use to avoid potential penalties or audits.
- Ignoring changes in HMRC rates: Stay updated with the latest HMRC mileage rates and any changes to the regulations. Ignoring updates can result in incorrect claims and potential tax issues.
By being aware of these misconceptions and pitfalls, you can navigate the process of claiming mileage expenses confidently and avoid any unnecessary complications.
Tools for tracking
To effectively track and calculate your mileage expenses, there are various resources and tools available that can simplify the process.
Read our complete guide to mileage trackers.
Here are a few popular options:
- Mileage tracking apps: Utilize mobile apps specifically designed for tracking business mileage. These apps often have built-in features for recording distances, categorizing journeys, and exporting reports for tax purposes.
- Online mileage calculators: Use online calculators that allow you to input your journey details and automatically calculate your mileage expenses based on the HMRC rates.
- Spreadsheet templates: Create your own mileage expense tracking spreadsheet using Microsoft Excel or Google Sheets. There are also pre-made templates available online that you can customize to suit your specific needs.
- HMRC guidance: Refer to the official HMRC website for comprehensive guidance on mileage expenses, including downloadable resources and detailed explanations.
By leveraging these resources and tools, you can streamline your mileage expense tracking and ensure accurate calculations for your tax deductions.
The HMRC mileage rates are straightforward to understand and use in your business. By using these rates for yourself and any employees who claim travel mileage expenses, you can stay compliant and provide fair return for travel.
Remember to keep accurate records, separate personal and business mileage, and stay informed about any changes in the HMRC rates and regulations. Using a mileage tracker app or a vehicle tracking system is a good way to help manage this if you have multiple employees and travel claims every month.