Understand the HMRC mileage rates (also known as mileage allowance payments) for the current tax year (2021/2022) for cars, motorcycles and electric vehicles. If this is confusing to understand what you can claim, then read on to untangle all the information relating to HMRC business mileage expenses.
This guide is suitable for anyone who wants to claim business mileage and is registered as self employed (sole trader) or a Limited Company owner. It also includes a company’s employees wanting to be reimbursed for travel costs.
Updated 9 August 2021
Table of contents
1. What are the 2021/2022 Mileage Rates in the UK?
The mileage rate is the amount per mile that businesses in the UK can claim as an allowable expense. This is when they use their personal vehicles for business travel. The rates are different according to the type of vehicle used but are set at a flat rate under what are known as simplified expenses. As a result, it will make it easy to claim for business costs, with minimal information.
The current mileage allowance rates 2021/2022 tax year:
- 45 pence per mile for cars and goods vehicles on the first 10,000 miles travelled (25 pence over 10,000 miles)
- 24 pence per mile for motorcycles
- 4p per mile for fully electric cars
The mileage rates set by HMRC is set at a rate per mile that contributes to the cost of wear and tear on a vehicle as well as fuel, MOT and servicing. Other car expenses are not tax deductibles such as MOT, repairs and fuel.
2. How to Calculate Business Mileage Expenses
Mileage can be claimed on eligible business travel in personal vehicles at a set rate per mile travelled. Here’s how to calculate the amount of mileage that can be claimed as a business expense:
- 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.
Here’s an example:
You are self-employed and travel to a clients site on 1 August 2021, driving 50 miles away from your normal place of work using your personal car and back again. You can claim for business travel of 45p x 100 miles = £45.
3. What is Business Mileage?
Business miles are those journeys travelled which are necessary for work reasons (you cannot claim for personal mileage). That’s occasions such as when you or an employee goes to see a client, supplier or have to work from a temporary workplace.
3.1 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 your travel as business mileage.
3.2 What is Ordinary Commuting?
You cannot claim business mileage for commuting from home to work, this is defined as ordinary commuting. Ordinary commuting are journeys between an business owners or employee’s home and their permanent workplace (the place they work from on a regular basis, which can include their house).
4. Keeping Business Mileage Records
Any mileage allowance payments must be supported by a record of each trip and the mileage rate claimed including:
- Miles travelled
- Reason for the trip
The easiest way to claim business mileage is to use a mileage claim form (you can download a copy here).
5. Can You Pay More or Less Than the HMRC Mileage Allowance Rates?
A sole trader cannot claim more than the standard mileage allowance rate set by HMRC against their taxes. They can claim less but will lose out on the tax-free allowance.
For Limited Company owners, they can choose to pay more than the HMRC mileage rates but any additional payments will attract income tax and National Insurance by way of a P11d tax.
Paying Less than the HMRC Mileage Allowance
The is no impact on sole traders and Limited Companies if they choose to pay less than the standard HMRC mileage rates. Therefore, they don’t need to report anything to HMRC.
However, employees of a business who have received less than the standard mileage rate, may be able to claim for the work mileage tax rebate. This means they’ll get a tax rebate for any unused allowance, usually through their tax code and payslip. Alternatively, the business could opt to join a scheme called Mileage Allowance Relief Optional Reporting Scheme (MARORS). Under the rules of the MARORS scheme, the employer can issue a report to HMRC of any amounts paid below the standard rates on behalf of their employees.