Does it matter if you drive your car or a company vehicle?
How much can you claim for mileage, and what records do you need to keep?
We have simplified the key things you need to know, so let’s get started.
What is a mileage claim?
A mileage claim is one way to get tax relief on a business journey in your own vehicle, whether that’s a car, motorbike, van, or bicycle.
What counts as ‘business mileage’?
Business mileage applies to any trip in a personal or company-owned vehicle required for an employee to fulfil their job responsibilities, other than ordinary commuting.
Business mileage includes journeys covered by the rules, for example:
- delivering orders;
- transporting goods;
- business trips to clients and partners;
- travelling to a temporary workplace.
The ‘24 month’ rule you need to know
HMRC has several rules in place to ensure that businesses claim mileage correctly, such as the ‘24 month rule’. This rule states you are entitled to claim travel expenses to your ‘temporary workplace’.
There are a few things to note:
- A workplace is considered ‘temporary’ if you have been working there on an irregular basis for less than 24 months.
- If you spend more than 40% of your working week at a workplace, that location would not be considered ‘temporary’ - it would be your permanent workplace and therefore you would not be able to claim travel expenses.
How much can you claim for mileage?
The amount that can be claimed depends on the type of vehicle and the distance travelled in the tax year.
The tax-free approved mileage allowance for cars and vans is 45p per mile for the first 10,000 miles in the financial year, and 25p per mile thereafter.
Motorbikes and bicycles are slightly different, as the rate remains the same for any distance travelled within the tax year: for motorbikes, it is 24p per mile and for bicycles, it is 20p per mile.
Example: How to calculate mileage expenses in the 2020/21 tax year
Events manager Cameron has driven 12,000 business miles in his personal van.
He can claim the first 10,000 miles as a business expense at 45p per mile.
He can claim the further 2,000 miles as a business expense at 25p per mile.
10,000 x 45p = £4,500
2,000 x 25p = £500
Total claim = £5000
If Cameron’s employer pays him back, but will only reimburse him at 15p per mile then he can claim tax relief from HMRC through his tax return for the additional amount.
- Important: If Cameron used a company car, the allowance would be different. The rates depend on the vehicle’s engine size and fuel type - whether that is petrol, diesel, or electric. You can check out the current Advisory Fuel rates here.
Things to note if you’re an employer
- You have certain tax, National Insurance and reporting obligations if you cover the costs of your employees using their own vehicles for business travel - find out more here.
- You’re allowed to pay your employee a certain amount of reimbursements towards mileage costs (known as ‘Mileage Allowance Payments’ or MAPs) each year without having to report them to HMRC. It doesn’t matter if your employee uses more than one vehicle in a year - it’s all calculated together.
- If your employee brings a co-worker along on a business journey, assuming they are also going for business reasons, you can pay them an extra £0.05 per mile tax-free. You won’t have to report this to HMRC or deduct and pay National Insurance on them either.
What records do I need to keep?
When the time comes for a HMRC audit, they will be looking at your entire travel and expense process from start to finish.
Here is a list of what you need to record:
- dates and the duration of the trip;
- start address;
- miles travelled;
- the purpose of the trip;
- the amount you are claiming.
You should store these records for five years to ensure there have been no misunderstandings in the calculations, and avoid unwanted fines.
> Check out our ‘How to create a mileage/travel policy here’ (link once created)
How does Expend help?
Expend is the engine you need to automate mileage claims - taking all the work out of the process and enabling employees to submit trip reports in seconds.
Simply enter start and end addresses and select if you used a personal or company vehicle - Expend will do the rest, from creating the journey using Google Maps, calculating the distance and value, to adding the VAT.
Trips can be split into multiple legs and return journeys can be added with one tap.
Once a mileage claim has been submitted, the expense will go through your approval process and is available to review instantly.
Disclaimer: This is not legal, accounting, or tax advice - it's simply a guide. If you need help, check with your accountant or contact HMRC directly.