A guide to business mileage allowance
Travel and transportation is one of the largest costs a business will face.
Delivering goods, meeting clients or commuting between work sites can soon rack up costs on the road. This is especially true for large fleets, but smaller businesses can be heavily affected by frequent, small journeys too.
However, there are ways to reduce business travel expenditure.
HM Revenue & Customs (HMRC) grants a ‘business mileage allowance’ to every company vehicle in professional use. But there are rules and variations that affect eligibility. Plus, your business structure may impact the relief you receive.
Professional vs. personal use
First and foremost, it’s imperative that you clearly define what ‘professional use’ is.
Some employees and business owners will only use a company vehicle while they work. Naturally, using a vehicle in this way falls comfortably into professional use.
For employees who take their company vehicle home with them and use it in their own time, their personal and professional mileage will need to be separated and reported correctly. For example, non-work journeys, like commuting to and from work, will not qualify for tax relief.
Claiming mileage on personal vehicles
Cars and vans classed as ‘personal’ (i.e. are owned by a member of your fleet) can claim back a mileage allowance of 45p per mile for the initial 10,000 miles in a tax year. Anything over this limit can be reclaimed at 25p per mile. The policy is designed to cover maintenance as well as fuel costs.
Motorcycle owners can claim back 24p per mile; this remains the same no matter how far they travel in the financial period.
Note that it doesn’t matter if an employee uses multiple ‘personal’ vehicles in a single year, the tax is calculated using the combined mileage of all their vehicles.
Distinctions for company vehicles
By contrast, a ‘company’ vehicle claims relief based on fuel expenditure. The amount you can claim varies depending on the type of fuel used, as well as the size of your engine.
Here’s a quick breakdown per mile:
It’s important to note, these numbers aren’t static. Levels are dictated by the AFR (Advisory Fuel Rates) from the Treasury. Global fuel trends cause them to fluctuate; it’s worthwhile checking back every three months (March, June, September and December) to see if these figures have changed.
As you can see from Table 2, these rates change for diesel vehicles. The most notable change can be found in the engine size, which stand at 1600cc or less, 1601cc to 2000cc and over 2000cc respectively.
Claiming business mileage allowance
Since you claim for fuel expenditure under a company car’s business mileage allowance, the AFR pricing table acts as a handy guideline if you’re setting a fuel expense policy. This gives you confidence that your policy is fair and cost-effective for everyone involved.
In some fleets, drivers pay for fuel themselves and claim back the mileage allowance they’re due on their Class 1 National Insurance contributions, up to the limits we outlined above. Alternatively, a company can pay for the fuel while reclaiming the tax themselves.
In either case, having a robust payment record is essential.
HMRC requires that you supply receipts and records of all your fuel expenditure. Fleets with personal and company vehicles need to keep track and ensure their records are HMRC compliant, despite the challenge of a mixed fleet. Generally, there needs to be a set of dates, figures and total mileage in order to reclaim everything you're owed.
TheAllstar One fuel card simplifies this process. Give each driver a card, set spending limits and allowances, and watch your business benefit from greater convenience and straightforward invoicing. What’s more, our Business Mileage Monitor works in conjunction with our card to help you accurately track your miles and make it simpler when applying for tax relief.
Want to make it easier than ever to claim back mileage allowance?Contact our expert team today.