How to claim for business mileage

Chris Andreou

April 21, 2021

claim for business mileage guide

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Who can claim business mileage?

Being self-employed often means having to juggle multiple roles and tasks.

Amidst all your different responsibilities, keeping track of your business mileage can appear tedious—and it can easily become a task that you postpone time and time again. Yet, these little trips can add up, and as a small business owner, it's important that you make the most of what you can claim. 

If you're newly self-employed, or just want to get a grasp on the basics of claiming your business mileage, this article is for you.

It explains the essentials, including how you can calculate your costs, the records you need to keep, and other important information that you need to be aware of.

Both business owners and employees can claim business mileage.

Claiming Business Mileage - Employees

As an employer, your employees can claim business mileage from you.

If you don't reimburse their expenses or pay them less than the HMRC rates, they can claim mileage allowance relief from HMRC.

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Claiming Business Mileage - Self Employed

As a self-employed person, you can claim back mileage from HMRC if you use your personal vehicle for business trips. According to HMRC, these trips are defined as journeys you make 'wholly and exclusively' for business purposes.

These include:

  • Trips taken to complete work (i.e deliveries)
  • Trips between two workplaces for the same job
  • Going from an employee's home to a client
  • Going to a temporary workplace

Here are some examples of journeys that don't count as business trips:

  • Driving to a location situated near your workplace (i.e. driving to client's office located just next to your home)
  • Trips in which your main purpose isn't business-related (i.e. running a business-related errand during a personal trip)

If you're unsure about what you can claim, it's best to clarify this with our accountants at Forma.

Receipts from business mileage claims

Business mileage calculation

There are two approaches you can take:

1. Add up all your motor expenses for the year. Calculate the number of business miles as a percentage of your total miles. This percentage can be used to work out the business percentage of your costs. 

2. Claim a fixed rate mileage allowance. The costs of purchase and upkeep are included in the rate. 

For small businesses, the second approach is a simpler option—there are fewer calculations involved, and you don't need to work out your total motor expenses across the year.

However, there are a few points you need to take note of:

  • Once you have decided on a method, you need to stick with it until the vehicle is replaced
  • If your business' annual turnover exceeds the VAT threshold (set at £85,000 for a 12-month period ending in 2020/21), you need to use the first method
  • You can't use the second method if you bought your vehicle with a capital allowance

Calculating Mileage Rates Costs [Example]

Calculating costs using HMRC mileage rates

If you're going by the second approach, you'll need to refer to the table below for the rates (per business mile) set by HMRC.

Note: Currently, there isn't mileage claim for bicycling for sole traders.

HMRC car mileage rates per mile

Here's an example:

John is a freelancer. Over the year, he has driven 15,000 business miles using his car. 

HMRC car mileage rates - example

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What's Inside:

  • Allowable business expenses
  • Employee expenses
  • Travel expenses
  • Office & equipment expenses
  • Professional services expenses
  • General expenses
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Limited Company Expenses Guide

What's Inside:

  • Allowable business expenses
  • Employee expenses
  • Travel expenses
  • Office & equipment expenses
  • Professional services expenses
  • General expenses

24 Month Rule for Business Mileage

HMRC has several rules in place to ensure that businesses claim mileage correctly, and the 24 month rule is one of these.

The rule applies to employees and contractors working in multiple locations. It states that you're entitled to claim travel expenses as long as your workplace is considered temporary. 

There are a couple of important points related to the rule:

  • Temporary workplace: A workplace is considered temporary if you've worked there for less than 24 months. After this period, you're considered a permanent employee-and therefore aren't entitled to claim travel expenses
  • 40% rule: If you spend more than 40% of your working time at a workplace, it is considered a permanent location. As such, you won't be able to claim travel expenses.

Record keeping requirements for business mileage

It's essential that you keep accurate records to back up your mileage claim.

You'll need to keep a detailed mileage log that records the date and location of each business trip, as well as the total number of business miles driven. 

Bear in mind that keeping track of the details doesn't have to be a tedious process, as long as you're using the right tools. Apps such as MileIQ and Autotrip can facilitate the process, making it easier to log your miles consistently.

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Book a free 30 minute call with an accountant. We'll help walk through setting up your business, switching accountant or any of your tax queries. All our fixed price accounting packages come with a 50% off for 3 months.

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