What is business mileage? An essential guide to claiming.

Whether you're a business owner or an employee, it's crucial to grasp the regulations around claiming business mileage expenses.

This blog explains the difference between business mileage and personal mileage, and shows the HMRC approved mileage rates. 

What is business mileage?

It's essential to distinguish between business and personal mileage to ensure that all claims for business mileage are valid for tax purposes.

Business mileage refers to the trips employees undertake on behalf of their employer including travels between work locations, client visits and other work-related journeys.

In contrast, personal mileage covers the distance travelled from home to work and any personal or social journeys that can’t be considered part of business travel.

Why is accurate reporting of business mileage expenses important?

Although the financial impact of business mileage expenses is relatively modest compared to a company’s revenue, it’s crucial to stick to the rules. This area of accounting is often subject to scrutiny, by Her Majesty’s Revenue and Customs (HMRC) making accurate reporting essential. 

Clear recording of mileage plays a role in the financial management of a business and it makes sense to adhere to the regulations, rather than risk penalties from HMRC. 

Precise management of business mileage claims also helps in maintaining records, avoiding disputes during audits and ensuring fair reimbursement for employees. 

What are the approved mileage rates by HMRC? 

HMRC enforces guidelines on approved mileage rates. These differ based on the type of vehicle used for business travel. The rates are designed to cover fuel costs, vehicle wear and tear and other related expenses. 

The approved mileage rates have remained the same since 2011 and Expend recently issued a press statement calling for the allowance to be updated by HMRC.

Here are the approved rates:

It’s crucial to use these rates to ensure acceptance and reimbursement of all business mileage claims. 

For businesses, what are the benefits of accurately claiming business mileage expenses?

Employers can benefit from properly calculated reimbursements, streamlined financial procedures and increased employee satisfaction. Also, precise claims can contribute to budgeting and financial forecasting, benefitting the financial health of your business.

It also helps you stay in line with HMRC regulations.

For employees, what are the benefits of accurately claiming business mileage expenses?

Employees can benefit from tax relief on their mileage expenses meaning they won't be taxed on the money their employer reimburses them for mileage, as long as it doesn't exceed the approved rates.

What are some recommended ways to track and claim business mileage?

Adhering to best practices is key. Here are some suggestions:

• Use tools and apps tailored for tracking business mileage to simplify record keeping and ensure accuracy.

• Software tools can create logs with dates, destinations, trip purposes and miles travelled.

• This digital data can be crucial, during audits of mileage claims, to comply with company policies and HMRC guidelines.

Disclaimer: this is not accounting or tax advice – it's a general guide. For assistance consult your accountant or contact HMRC directly.