How can I claim business mileage as an expense?

The subject of claiming for business mileage is a common question, and this blog provides some clarification. Here are a few common queries:  

• Which trips are eligible for business mileage claims?

• Is the business mileage rate different for a company car, rather than a private car? And how much can I claim for business mileage?

• What mileage expense records do I need to keep?

The first thing to mention is that His Majesty’s Revenue and Customs (HMRC) set a standard rate for reimbursement, known as the approved standard HMRC mileage rate. If you claim at this rate, you will not be taxed on the amount your employer reimburses you. 

Your employer may choose to reimburse at a rate higher than the approved rate, but you will be taxed on the difference between your employer’s rate and the HMRC approved rate.

It’s also worth knowing that the approved rate is an allowance, and you are not automatically entitled to it as an employee. So, your employer may reimburse you at less than the HMRC approved rate, in which case you will need to apply to HMRC for tax relief on the additional amount.

Which trips are eligible for business mileage claims?

Business mileage applies to any trip in a personal or company-owned vehicle required for an employee to fulfil their job responsibilities. For tax purposes, business mileage claims are not permitted for day to day commuting to and from your normal place of work. 

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 subject of temporary workplaces is important. 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’ only.

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.

Is the business mileage rate different for a company vehicle, rather than a private vehicle? 

Let’s think about private vehicles first. 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 after that.  

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.

If you bring a co-worker along on a business journey, in your own car or van, and they are also going for business reasons, you can claim an extra 5p per mile, per co-worker, tax-free. 

The business mileage rates for private cars are designed to reimburse you for your fuel costs and include an additional contribution to the insurance, road tax, and general wear and tear of your private car.  

However, if you clock up business mileage in a company car, you can expect the rate to be set by your employer. This will often be less than the HMRC approved rate because the maintenance and running costs have already been paid by your employer.

It’s worth noting that the approved rates for business mileage have remained the same since 2011, and given recent rises in the cost of living, the approved rate allowance may not cover the true costs of business mileage. Some employers are choosing to deal with this by reimbursing more than the approved rates. 

How to calculate mileage expenses in the 2022/23 tax year

Here's an example. 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 = £5,000

• If Cameron’s employer pays him back, but does not reimburse him at the HMRC approved rate and refunds him at, say, 15p per mile then he can claim tax relief from HMRC through his tax return for the additional amount.

What mileage expense records do I need to keep?

If you are an employer, there is always the possibility of HMRC auditing your business expenses. This will include 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;

• destination;

• miles travelled;

• the purpose of the trip;

• the amount you are claiming.

These records need to be stored for five years to ensure there have been no misunderstandings in the calculations, and avoid unwanted fines. 

How does Expend help with business mileage expenses?

Expend provides a range of automated tools to help control expense management, easily, across businesses of all sizes. 

The Expend Mobile App can automate mileage claims - taking all the work out of the process and enabling employees to submit trip reports in seconds.

The app simply requires employees to enter their start and end addresses for the trip, and to select whether they used a personal vehicle or company car. 

The Expend Mobile App will automate the entire process, including creating the journey using Google Maps, calculating the distance and value, as well as adding the VAT. Business trips can be split into multiple legs, and return journeys can be added with one tap. 

This means that once a business mileage claim has been submitted, the expense will go through the business approval process and is available to review instantly.

The Expend app also enables fuel receipts, notes and job numbers to be added and uploaded, and integrated with business accounting software packages, such as Xero or Quickbooks.

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.