In this blog, we discuss self-employed mileage allowance and look at how you go about recording mileage for your UK tax return.
It’s an important topic for sole traders who use their vehicle for any business purposes.
There are growing concerns about the impact of the rising cost of living on self-employed businesses, and properly managed tax arrangements are an important way to ensure sole traders limit their tax liability.
Read on to find out how to claim mileage allowance if you’re self-employed.
What is self-employed mileage allowance?
Self-employed mileage allowance comes under the HMRC umbrella of simplified expenses.
As the name suggests, these expenses reduce the admin and complexity of managing a sole trader’s tax affairs.
Rather than having to track all driving-related costs such as insurance, repairs, servicing, and fuel, the allowance allows individuals to claim vehicle expenses using a flat rate for “business” mileage.
Note: some individuals may prefer to claim for the precise amount of vehicle costs and HMRC offer a checking tool to find out what is best for your business.
Business mileage includes trips between your fixed workplace and clients or suppliers – and your fixed permanent workplace can be your home.
The fundamental rule is journeys must be “wholly and exclusively for business purposes”. If you’re unsure at all whether a journey is claimable, ask our team.
Be aware, you can’t submit a claim on a car used commercially such as a taxi. Nor can limited companies make use of the simplified expenses route.
How do you calculate your self-employed mileage allowance?
If you’re not taking the simplified route, there’s a fair bit more leg work involved. Everything from parking to insurance needs to be covered.
However, we still advise those opting for the flat rate to be proactive in keeping on top of their records.
After each trip for “business purposes” take note of the date, mileage, and reasons for travel. This forms a much more credible claim if HMRC audits your tax return.
Ideally, keep this information digitally, or submit it directly into your accounting software.
Using the flat-rate system, you can claim:
- 45p per business mile travelled in a car or van for the first 10,000 miles
- 25p per business mile for each mile more than 10,000 miles
- 24p per mile if you use your motorbike for business journeys
Note, you can claim more if you’re driving with a colleague as a passenger.
How do you submit a self-employed mileage allowance?
Good accounting software will help you calculate exactly how much to claim. Equally, your accountants can help with this.
Submitting your mileage allowance is straightforward.
You can claim your tax rebate for mileage by completing a form P87 or a self-assessment tax return either online or by post.
HMRC have a handy guide both to working out your mileage allowance and submitting it here.
How to record mileage for taxes in the UK
Self-employed mileage allowance offers tax savings to the self-employed who use a vehicle for work.
If your job involves driving, you should be tracking your mileage ahead of your next self-assessment tax return.
For more information about this topic, get in touch with our team for a no-obligation chat.