Claiming mileage is no easy task. Trying to understand the HMRC mileage claim rates and how to use them can seem complicated. Whether you are an employer reimbursing your employees or an employee who needs to know more about mileage allowances, we have all the information you need.
There are so many resources available about claiming mileage, it’s hard to know where to start. That’s why our experts here at Autotrip have compiled this ultimate guide with everything you need to know about mileage claims, all in one place.
A. Understanding Your Business Travel Expenses:
- 1. What is Business Mileage?
- 2. Business Travel Expenses
- 3. Commuting and Working From Home
- 4. Subsistence & Overnight Allowances
B. The HMRC Mileage Rates and How To Use Them:
C. Everything You Need To Know About Claiming Mileage:
- 8. Claiming Mileage as Self Employed
- 9. Claiming Mileage Allowance Relief
- 10. How to Reimburse Employees for Mileage
- 11. Claiming VAT on Business Mileage
D. Other HMRC Rules You Need To Know About:
E. How To Make Claiming Mileage Easy and Painless:
- 14. Top Mileage Calculators in the UK
- 15. Free HMRC Mileage Claim Form Template
- 16. Automatic Mileage Tracking – the New Era
1. What is Business Mileage?
The first question you need answering when entering the world of claiming mileage for work, is what actually counts as business mileage? The HMRC defines a business trip as any drive you make ‘wholly and exclusively’ for business purposes. This covers:
- Trips needed to complete work, e.g. deliveries.
- Trips between two workplaces for the same job.
- Driving from an employees’ home to a client.
- Driving to a temporary workplace e.g. building site, client’s office.
However, there are some trips which you can’t factor in when claiming fuel expenses. Find out about these in What is Business Mileage: The HMRC Perspective.
2. Business Travel Expenses
If your business requires you or your employees to travel for work, it’s important to keep track of any travel costs. Why? Companies can save money by claiming fuel expenses and VAT. Also, employees can claim travel expenses and related costs such as meals, overnight accommodation, parking fees, road tolls, and congestion charges.
There’s a lot of potential to save money because employees are not expected to pay tax on these business travel expenses, if the employer directly pays for the employee’s travel costs, or reimburses what they have spent later.
Still not clear on how to claim travel expenses? Find out more in Claiming Travel Expenses – What You Should Know.
3. Commuting and Working from Home
HMRC defines a commute as the drive you regularly make from your home to your permanent place of work. HMRC doesn’t currently consider travelling to work as tax deductible, but there are a few exceptions to be aware of:
- You have to work temporarily in a different location to your permanent workplace.
- Your journey to this temporary workplace is very different from your usual commute. Skip ahead to the 10-mile rule.
- You work at this location for under 24 months and you spend less than 40% of your work week at the temporary location, for example, 2 days out of 5. Skip ahead to the 24 Month Rule.
If you work from home, however, you may find it more difficult to claim back travel expenses from HMRC. This is because you need to first prove that your home is your ‘base of operations’ so that when you do make a business journey it does not get counted as a commute.
If you need more information take a look at – HMRC: Claiming Travel Expenses From Home To Work.
4. Subsistence & Overnight Allowances
Working away from home can incur a lot of costs. A subsistence allowance is the money an employer gives to an employee to cover expenses due to working away from home. This can include accommodation, travel expenses, meals and even business phone calls.
These costs can only be claimed when a trip is made purely for business purposes and you actually spend the money on business travel expenses. To prove this you will need to keep a track of all your receipts.
Understand more about the HMRC Subsistence Allowance For Working Away From Home.
5. Company Car Mileage Rates
If you or one of your employees uses a company car, you can use the HMRC mileage claim rates to pay for any fuel used for business purposes. These rates, also known as advisory fuel rates, are the maximum mileage allowance the driver can receive without paying tax.
Using these fuel claim rates is beneficial because when an employer pays a rate the same as, or lower than, the advisory rates, the HMRC recognises there’s no taxable profit and no Class 1A National Insurance to pay. If an employer pays lower than the HMRC rates then the employee can claim back mileage allowance relief from the HMRC.
Do you need to know more about company car mileage rates? Make sure you read HMRC Company Car Mileage Rates For 2019.
To subscribe to the latest company car mileage rate updates, fill out the form below:
6. Private Car Mileage Rates
HMRC provides mileage allowance rates for any travel an employee makes in a personal vehicle. These are different from the previous company car rates because they include other expenses of running a car, such as road tax, wear and tear and insurance. These rates are known as Approved Mileage Allowance Payments or AMAPs.
An employer can pay this rate of mileage allowance (or lower) without paying tax, according to HMRC. If the employer pays a higher rate than the AMAPs then they will have to report this to the HMRC using the P11D form. This is because they will need to pay tax on the free fuel they are providing to their employee. Alternatively, the extra money can be added to the employee’s pay and taxed with the rest of their income.
Learn How to Use HMRC Private Car Fuel Rates in 2019 here.
To subscribe to the latest private car mileage rate updates, fill out the form below:
7. Electric Car Mileage Rate
The mileage rate for electric cars is currently 4 pence per mile. This is known as the new AER and, in the same way as private and company car fuel rates, if you pay this amount or lower the HMRC recognises there’s no tax to pay.
There are not currently any fuel claim rates specifically for hybrid cars. Instead, if you drive a hybrid you will need to use the Advisory Fuel Rates.
Are you, or one of your employees, using an electric car? Then make sure you’re up to date on the HMRC Mileage Rates For Electric Cars 2019.
To subscribe to the latest electric car mileage rate updates, fill out the form below:
8. Claiming Mileage as Self Employed
If you’re self employed, claiming back mileage from HMRC can feel like a lot of extra work. First, you need to start with the earlier section of this article, ‘What is Business Mileage?’ to find out how many miles you have driven for business purposes. Then you have a choice of two methods to work out your mileage claims:
- Actual expenses method – you need to record all of your costs manually. Once you know all of your total travel expenses for the year (including insurance, tax and repairs), work out the number of business miles you have done as a percentage of your total miles. Use this to find out the business percentage of your costs.
- Simplified expenses method – for this method you use the HMRC mileage rates to find out how much you can claim. These are fixed rates per mile which include most of your travel expenses such as wear and tear of your vehicle.
Learn How to Claim Mileage as Self Employed to claim your mileage as efficiently as possible and save money at the end of the tax year.
9. Claiming Mileage Allowance Relief
If you are being paid a low mileage allowance (or none at all) then you could be entitled to mileage allowance relief from HMRC. The way this works is the amount you spend on business travel expenses is taken out of your wage for tax calculations. This means you don’t pay tax on those costs. So, HMRC reduces the amount of your overall pay that is taxed.
The mileage rates which are used in this scenario are the AMAP rates. This reduces your income tax so you cannot claim back more than your total income tax for a year. If you think you could be entitled to relief then read our full guide – Claiming Mileage Allowance Relief: All You Need To Know.
10. How To Reimburse Employees For Mileage
Mileage reimbursement is the blanket term for the money an employer reimburses their employee for business travel expenses. If you are an employer, it’s important for you to understand the different types of mileage reimbursement, because if you choose to use the HMRC rates or lower, there’s no tax to pay on travel costs.
If you pay higher than these rates there will be a fuel benefit charge, unless you add the money to your employee’s wage, in which case it will be taxed with the rest of their income.
Learn How to Reimburse Employees for Mileage in the UK now and make sure you implement a transparent mileage reimbursement policy.
11. Claiming VAT on Business Mileage
If your business is VAT registered then you are entitled to claim VAT on the fuel for business trips. Firstly, you need to keep track of all your receipts to make a VAT claim. Next, you need to work out your total petrol costs for business-related travel.
The easiest way to do this is by using Advisory Fuel Rates. These are the rates for company cars, which we use because, unlike the rates for private cars, the advisory rates only cover fuel rather than other costs like wear and tear of the vehicle.
By using these rates, we can get the total business fuel cost including tax. So once you multiply your total business miles by the AFR rates you have your costs including VAT. To get just the VAT you multiply the total by ⅙ to get just the value of tax.
Sound complicated? Claiming VAT on Business Mileage can help. If your business is VAT registered it is important to understand how you can save money on your business travel expenses.
12. What is the HMRC 10 Mile Rule?
HMRC has a few very specific rules to help ensure mileage claims are made correctly, such as the 10-mile rule. This rule is for anyone commuting to a temporary workplace. Essentially, if your temporary workplace is within a 10-mile radius of your current workplace, then you cannot claim any mileage. This is because anything within 10 miles of your usual workplace is still seen as a regular commute, which you cannot claim mileage on (see Commuting and Working from Home).
However, if your temporary workplace is more than 10-miles away from your usual work, then you can claim mileage because you are driving significantly more miles for business purposes. Find out more in: What is the HMRC 10 Mile Rule?
13. The 24 Month Rule Contractors
The 24 month rule is for contractors or anyone who works in multiple locations. As you may know from earlier in this article, you cannot claim mileage for your regular commute. What about if you commute to multiple locations? That is where this rule comes in.
This rule states that if you work in a location for longer than 24 months (and more than 40% of your working time is spent there), then you cannot claim mileage because it counts as a permanent workplace. So, if a workplace is temporary, then you can claim mileage, just be careful not to exceed 24 months or 40% of your time otherwise you will no longer be able to claim tax back from HMRC.
If you are a contractor, or you often work in multiple locations, make sure you understand The 24 Month Rule for Contractors.
14. Top 6 Mileage Calculators in the UK
Keeping track of all your business mileage can be time-consuming and stressful. One basic way to get ahead with your mileage claims is by using a mileage calculator. You can speed up the claims process somewhat by calculating numbers like your journey distance and amount spent on fuel.
Mileage calculators also mean you don’t need to work out all of the maths yourself, which is a lengthy and sometimes unpleasant task. However, using a mileage calculator still requires you to record all of your information manually, rather than using an easier automatic system.
We’ve put together our Top 6 Mileage Calculators in the UK to help you get a handle on making your mileage claims process simple.
15. Free HMRC Mileage Claim Form Template
Getting your mileage claims right is an easy way to save yourself money every year. To get the most tax deductions possible you need to keep mileage records, you can submit the form below to get the right template for you to record your mileage with ease:
16. Automatic Mileage Tracking – The New Era:
So, what is the most efficient and easy way to record and claim mileage?
Here at Autotrip, we’ve developed a solution that can help you keep track of your business mileage automatically.
Autotrip’s plug and play GPS tracker captures every drive employees make and our software calculates the mileage and VAT that businesses can claim, saving you time and money.
Find out how we make mileage simple at autotrip.com and see how we’ve recorded over 7.8M miles and 482,000 business trips in the past year, saving our clients 1000s of hours that would have been otherwise spent logging mileage manually.