I’ve updated this on 6 April 2020
When you use your personal car for work purposes you can use the self employed mileage allowance to claim an amount as a business expense and tax deduction.
Here’s how it works.
What is the Mileage Allowance for the Self Employed?
When you are self-employed and use your personal vehicle for business travel, HMRC permits you to claim a set amount per journey as an allowable business expense against your taxes.
This set amount takes the form of a car mileage allowance per mile and covers the cost of fuel as well as wear and tear on your vehicle, MOT and servicing.
HMRC are pretty strict about:
- How much you can claim;
- What trips you can claim for;
- The records you need to keep to back up your mileage allowance claim.
How Much is the Mileage Allowance for Self Employed
The self-employed mileage allowance rates have been the same since 2011 but vary according to the type of vehicle you have.
The 2020 rates per mile for cars are 45p for the first 10,000 miles and 25p over 10,000 miles.
The motorcycle mileage allowance is 24p per mile, regardless of how many miles you travel.
The bicycle mileage allowance is 20p per mile, no matter how many miles you travel.
|First 10,000 Miles||Over 10,000 Miles|
|Cars and vans||45p||25p|
How to Calculate Your Self-Employed Mileage Claim for Taxes
To work out the amount of mileage you can deduct against your taxes you’ll need to:
- Add up the number of business miles you have travelled;
- Multiply the number of miles in Step 1 by the HMRC mileage allowance rate per mile.
You drive 11,000 business miles in the tax year 2019 using your own car.
The total amount of mileage you can claim against your taxes is calculated as follows:
£4,500 on the first 10,000 miles (10,000 x 45p)
£250 on the remaining 1,000 miles (1,000 x 25p)
You can claim a mileage expense on your 2019 taxes of £4,750.
You can also claim £4,750 from your business bank account as a tax free refund for what you have spent personally fuelling and maintaining your vehicle.
What Trips Can You Claim Mileage Allowance For?
You can claim business mileage against your taxes for journeys that are necessary for work reasons.
That’s times like when you see a client or supplier and if you work from a “temporary workplace“
What is a Temporary Workplace?
A temporary workplace is defined by HMRC as one which you attend that:
- Is for a limited time only, like a one-off meeting;
- Meets the “40% rule” – that means a workplace that you spend less than 40% of your working time at;
- Is for less than 24 months.
So watch out, if you are a freelancer and have a fixed arrangement with a client at their premises you may not be able to claim the mileage.
Can I Claim Mileage to and From Work if I am Self-Employed?
When you are self-employed you cannot claim mileage for commuting to work, unfortunately.
This is what HMRC classifies as “Ordinary Commuting“.
What is Ordinary Commuting
HMRC defines ordinary commuting as being journeys between an employee’s home and their permanent workplace. Your permanent workplace is the place you attend regularly. That may even be your own house if you work from home. A regular journey is one that you have to do in order to get to work. That means if you choose to rent an office, you would not be able to claim any type of travel cost getting to it or home again.
Examples of Trips Eligible for the Mileage Allowance
You work from home and go to visit a potential new client.
You can claim the mileage from your home to the client on your taxes.
You are self-employed and decide to rent out an office space.
You cannot claim the mileage allowance for travel between your home and office because this would be an ordinary commute to your permanent workplace.
You’ll be able to claim for the self-employed mileage allowance for any one-off journeys outside of your regular commute.
You are a self-employed gardener and store your tools at a local garage.
You cannot claim mileage for travelling between your home and garage because this is considered part of your ordinary commute.
Are Other Car Expenses Tax Deductible?
The self-employed mileage allowance covers the cost of wear and tear on your vehicle as well as fuel, MOT and servicing. That means other car expenses are not tax deductibles like MOT, repairs and fuel. The HMRC Mileage Allowance rate per mile is set to include a contribution to these costs.
What Records Do You Need to Keep
As with any other business expense, you must keep records to support your mileage claim. Obviously, you won’t have a receipts like you would for other expenses. So instead, your claim needs to be supported by a record for each trip of:
- Miles travelled
- Reason for the trip (for example customer or supplier name)
Always remember to keep as detailed a record as possible for each of your journeys just in case HMRC ask to look at your records.
How to Record Your Business Mileage
The way you choose to track your business mileage depends on how many miles you travel.
If you only make a few journeys, then you could choose to use a spreadsheet to track your mileage and mileage claim.
I’ve put together a Business Mileage Tracker that you can use to help get you started.
If you use your personal vehicle on a more regular basis then writing everything down on a spreadsheet may get time consuming.
Or worse, you end up forgetting to claim your self-employed mileage allowance on your tax return.
Quickbooks Self-Employed has a built-in mileage tracker. It works by tracking all your mileage and then lets you run through what it has recorded so you can mark each journey as business or personal.
How to Claim for Other Travel Costs
Similar rules apply to other travel costs, like trains, taxis and tube. Journeys outside of your ordinary commute would be tax deductible.
Again you’ll need to make sure you have all the right documentation and receipts to support your claim when you complete your self-assessment tax return.
Can I Claim for Food Against My Taxes
You may be able to claim for certain food when you travel outside of your ordinary commute.
But there are restrictions, so you should make sure you follow the rules before you claim anything against your taxes.
New Here? Learn how to set up the financial side of your business with these easy to understand guides and resources:
- Sole Trader or Limited Company? – Download my free calculator to check which business structure would help you to pay less tax;
- Government Support For the Self-Employed During Coronavirus – Find out about the schemes available, which ones you are eligible for and how to claim;
- Tax Records and Bookkeeping – Understand what tax records you’ll need to keep and how to set up your own bookkeeping system;
- How to Fill In Your Tax Return Online – In this step-by-step guide, you’ll find everything you need to know to fill in your tax return online and beat the HMRC deadline.
- Self Employment Taxes Explained – Learn what taxes you’ll pay, how much and when;
- VAT Guides – From registration to de-registration, VAT schemes and thresholds, these guides will take you through the basics every UK small business owner needs to know;
- Invoice Template – Free template and step-by-step guide so you can get paid by your clients.