Mileage Allowance: All You Need to Know
Mileage Claims
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Mileage Allowance: All You Need to Know

A mileage allowance is what your employer pays you to cover the cost of using a personal vehicle for business journeys.

That’s the basis. But of course, there’s so much more you need to know.

You can claim mileage allowance if you use personal cars, vans, motorcycles, and bicycles, also known as grey fleet, for business reasons. The allowance covers fuel as well as wear-and-tear.

The HMRC sets allowance rates as guidelines for companies to follow. These are better known as Approved Mileage Allowance Payments (AMAP). The rates for 2018 in the UK are as follows:

Vehicle TypePer Business Mile – under 10,000 milesPer Business Mile – over 10,000 miles
Cars and Vans45p25p

Please note: You need to drive the 10,000 miles within the same tax year.

If you want to learn more about the different HMRC rates, have a read of our Company Car Mileage Rates blog post.

What If My Employer Sets an Allowance Rate Below the HMRC Guidelines?

If your employer chooses to set a mileage allowance that is below the HMRC rates, you can claim Mileage Allowance Relief. You can do this by completing a p87 form with HMRC.

Sign up today to get automatic notifications whenever the AMAP rates change, so you’re always sure your employer is setting the right ones:

What Counts As a Business Journey?

We’ll rip the bandage off quickly: Your daily journey to and from work does not count. What does count however is:

  • Journeys you have to make to carry out your work
  • The journey between two workplaces for the same job
  • If you are a site-based employee with no permanent workplace for less than 24 months
  • Journeys from your home to a client

What Should My Business Mileage Record Include?

  • The dates and times of the trip
  • Start and end addresses
  • The mileage travelled, which you can easily determine with this mileage calculator.
  • Reason for the journey
  • Number of passengers, who must be employed by the same company
  • Amount claimed

What Is the Self-Employed Mileage Allowance?

Those who are self-employed as a sole trader or a business partnership that doesn’t involve a limited company can use the rates in the table above. If you don’t, you’ll need to claim your mileage as tax relief on your Self Assessment tax return.

The Maths

The easiest way you can calculate your mileage allowance is with this easy calculation. All you have to do is multiply the miles you’ve covered for business reasons in each year, by the specific rate per mile. Here are two examples:

Example One:
The total business mileage you have travelled on your motorcycle, in one tax year is 9,000.
You can claim 24p per mile for the first 10,000 business miles. So multiply 9,000 x 0.24.
Meaning your mileage deduction is £2160.

Example Two:
The total business mileage you have travelled in your car, in one tax year is 14,000.
You can claim 45p per mile for the first 10,000 business miles and 25p for the rest. So multiply (10,000 x 0.45) + (4,000 x 0.25).
Meaning your mileage deduction is £5,500.

There’s another calculation you can use called the Actual Expense Method. This one is a little more complicated because you need to collect the actual costs to run the vehicle. Such as:

  • Gas
  • Oil
  • Tires
  • Insurance
  • Repairs
  • Registration Fees
  • Licenses

Here’s an example of how you would calculate your mileage deduction using this method:

The total mileage you have travelled in one tax year is 9,000 business miles, and 2,000 personal.
However, you spent £3,000 on car repairs, fuel, and servicing. So divide 2,000/9,000, which equates to 22%
This means you can claim 22% of the £3,000, which ends up at £660.

For More Information

You can find out more about the best way to calculate your miles on your business trips on our page: Top 6 Mileage Calculators in the UK.

If you drive an electric car for business trips, find more information on our page: Business Mileage Rules and Tips for Electric Cars.

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