What Is HMRC Mileage Allowance And How Does It Work?

Are you required (directly or indirectly) to make business trips in service of your career? Many people are. 

Using their own personal transport, they need to cross large distances to visit sites, reach meetings, and even move goods — and they can rack up worrying fuel costs along the way (there are ways to save fuel, of course, but they only go so far). If they’re employees, they can be compensated by their employers, but it doesn’t always happen. Sometimes they’re left to finance their trips.

Whether you’re an employee of a company that won’t pay for the fuel you use on business trips, a self-employed professional, or the head of your own company, you have the option of using the HMRC mileage allowance to recoup some of your costs. But what does that actually entail?

In this post, we’re going to answer the core questions about the HMRC mileage allowance, detailing what it involves, how it works, and how you can use it. Let’s get started.

What is HMRC mileage allowance?

Very simply, HMRC mileage allowance lets you claim a reduction of your taxable income to partially offset what you’ve spent on certain travel costs for business trips and not had reimbursed by an employer. It applies only to distance covered during the relevant tax year, and only to travel using vehicles not owned by your employer (so no company cars).

With mileage allowance, you’re required to calculate the amount to claim. For this, you must use the number of miles travelled for business and the type — or types — of vehicle used along the way. You can then submit it to HMRC for consideration and approval if everything checks out.

What is mileage allowance meant to cover?

The purpose of mileage allowance is to cover the expenses involved in using, fueling and maintaining personal vehicles for business-required journeys. Keep in mind that it’s a simplified method intended to make tax assessment easier — the alternative is to carefully tally relevant capital allowances such as servicing costs, car insurance charges, and fuel payments.

Note that the idea of mileage allowance is not to cover anything other than journey-related costs accrued during your business trips. The relief isn’t meant for tolls, congestion charges, parking fees, or anything along those lines: though you don’t need to give this any thought when using the conventional mileage allowance calculation.

When can you claim mileage allowance?

If you’ve been required to cover distance for your company using a private vehicle during the current tax year — and you haven’t been reimbursed up to the standard AMAP (Approved Mileage Allowance Payments) rates by the end of it — then you can make a mileage claim.

Due to its simplicity, the only firm restriction on mileage allowance calculation is how you determine the number of miles to claim. The main limitation concerns commuting: if you have a permanent workplace that you travel to on a regular basis, you cannot claim for that travel. You also cannot claim for similar trips, such as driving to and from a location very close to that area.

There is a rare exception to this: if you’re in a permanent position (i.e. not on a temporary contract) and commuting to a temporary working site (you won’t be working there for longer than 24 months), then you can claim for those miles. If you’re unsure, get some expert advice.

Otherwise, you can claim mileage allowance for any instance of your business requiring you to make non-commuting journeys to fulfil your duties. For instance, if you have to drive to a conference or to a client’s office (or if making certain journeys is a core part of your job, as is the case for truck drivers or chauffeurs), then all the miles covered will count — provided, at least, you don’t take huge diversions to pursue non-business purposes.

Who can claim mileage allowance?

Anyone with business-related fuel costs fitting the identified criteria who hasn’t had them fully covered by an employer is entitled to make a mileage allowance claim. It doesn’t matter if they’re self-employed or a company employee — just that they had to cover them for business and were using their personal vehicle (or vehicles) for the claimed miles.

“Vehicle” is necessary here because mileage allowance doesn’t simply cover cars. Standard rates exist for cars, vans, motorcycles, and even bicycles — so if you ride your own bicycle for some kind of full-time delivery job, you can claim on the miles covered.

Note, though, that you cannot claim mileage allowance for a given vehicle if you’ve already taken the capital allowance route. Once you’ve chosen a calculation method (likely based on what’s most convenient and most impactful in your case), you need to stick with it for as long as you’re claiming for that particular vehicle.

What are the mileage allowance rates?

HMRC provides the following AMAP rates that you can use to calculate your mileage claim:

Each business mile up to 10,000

Every business mile over 10,000

Cars and vans

45p

25p

Motorbikes

24p

24p

Bicycles

20p

20p

 

These basic rates apply to miles spent with you as the driver (or rider) and none of your colleagues joining you. In the event that you’re tasked with transporting two or more colleagues on a business trip, you can claim an additional 5p per mile for each one.

How can you claim mileage allowance relief?

The method for calculating mileage allowance relief is very simple and far easier than the complex capital allowance route. Using the restrictions we’ve set out, tally the number of miles you’ve covered on business journeys using the vehicle in question, also factoring in any miles covered while transporting multiple colleagues.

Once you have the total, multiply anything up to 10,000 miles by the appropriate rate from the AMAP table, and do the same for any additional miles. Then, when the tax year wraps up, claim that figure as your mileage allowance.

What if you have a company car?

If you’ve been granted a company car by your employer and have been using it to make business journeys, you can’t claim mileage allowance, but you can claim tax relief on your fuel costs if your employer isn’t compensating you for them in line with the Advisory Fuel Rates (AFR) — or the Advisory Electricity Rate (AER) if your company car is electric.

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