If you're a UK employee or self-employed person who uses your personal vehicle for business purposes, you may be able to claim mileage expenses on your tax return. However, it's important to understand the guidelines and requirements set by HM Revenue & Customs (HMRC) to avoid mistakes and potential penalties.
Keep accurate records
The first step to claiming mileage expenses is to keep accurate records of your business trips. You'll need to record the date of each trip, the destination, the reason for the trip, and the number of miles travelled. You can use a mileage logbook, a spreadsheet, or a mileage tracking app like Psngr that automatically records and calculates your business mileage expenses.
Calculate your mileage expenses
Once you have recorded your mileage, you can calculate your mileage expenses. There are two methods to calculate your mileage expenses:
The fixed rate method
The fixed rate method is the easiest and involves multiplying the number of business miles travelled by the HMRC's approved mileage rate, which is currently 45p per mile for the first 10,000 miles and 25p per mile thereafter.
The actual cost method
The actual cost method involves calculating the actual cost of running your vehicle, including fuel, insurance, repairs, and maintenance, and then claiming a portion of those costs based on the proportion of business miles travelled.
Fill in the correct forms
As a UK employee, your employer would need to fill in a P11D form to report expenses and benefits provided to you, including mileage expenses. The P11D form is a tax form that must be submitted to HMRC every year by July 6th.
However, if you have received reimbursement for business mileage at a rate lower than the approved mileage rates, your employer can include this amount in your earnings and report it on your P60 form at the end of the tax year. This would mean you would not need to fill in a P11D form for that specific reimbursement.
If you are self-employed, you would report your mileage expenses on your self-assessment tax return. You can use the self-employment section of the tax return to claim business-related expenses, including mileage expenses.
On your self-assessment tax return, you would provide details of your business mileage, including the total number of business miles traveled and the amount claimed for mileage expenses. You can calculate your mileage expenses based on the HMRC-approved mileage rates. The current HMRC approved mileage rates for the tax year 2022/2023 are as follows:
- Cars and vans:
- First 10,000 miles: 45 pence per mile
- After 10,000 miles: 25 pence per mile
- Motorcycles: 24 pence per mile
- Bicycles: 20 pence per mile
These rates are intended to cover various costs associated with running a vehicle, such as fuel, insurance, maintenance, depreciation, and general wear and tear. When using these rates, you cannot claim other expenses for your vehicle.
Note that these rates apply to business mileage only and cannot be claimed for personal or commuting mileage.
Keep records for at least 5 years
It's important to keep records of your mileage expenses for at least 5 years in case HMRC requests them for an audit. You should keep all receipts and invoices for fuel, repairs, and maintenance, as well as your mileage logbook or tracking app records.