When you are self-employed, you are your own company and hence you should always be looking to save you money on your tax bill. Any. Which. Way. You . Can.
Claiming car or van mileage for business related travel is straight forward - You claim for business mileage via your Self-Assessment tax return and within this TAXO'D guide, we cover everything you’ll need to know about car and van mileage allowances and business vehicle tax deductions.
Business mileage is a trip in a personal or company-owned vehicle required for an employee to complete their job responsibilities. This does not include commuting to and from your place of work.
Business mileage could be:
If you use a car for a business journey (and the car is yours and you own it!) - then you can claim 45p per mile. This 45p tax-free covers the initial 10,000 business miles in a year. After that, it decreases to 25p per mile.
If you are working for a company and they reimburse you at any figure less than 45p per mile (let's say 20p a mile) then you can claim the additional amount (ie 25p) on your tax return, as a deduction from your taxable income.
It is worth noting that if you are the driver and travel with additional passengers (all employed from the same business) you can claim an additional 5p per mile for each additional passenger. Best start finding some people whom you work with who fancy car sharing with you ;-)
The business mileage rates for cars for 2021 have been (what they have been for the last decade) 45p per mile. 45p for the first 10,000 miles in the financial year – it’s 25p per mile thereafter. The business mileage rates for motorbikes for 2021 is 24p per mile for the first 10,000 miles in the financial year – it’s also 24p per mile thereafter. The business mileage rates for bicycles for 2021 is 20p per mile for the first 10,000 miles in the financial year – it’s also 20p per mile thereafter.
Yes. A business can pay employees an amount (full or partial) towards their business mileage costs and these reimbursements are called ‘Mileage Allowance Payments’ (MAPs). If a business does not contribute towards business mileage costs than employees can claim back tax relief through their end of Self Assessment tax return. (Obviously this is not relevant for freelancers)
No. You cannot claim separately for vehicle running costs and MOTs, as the business mileage rate of 45p a mile covers these expenditures.
If you are using the HMRC simplified expenses then the rates we have already discussed (45p for the first 10,000 miles, and 25p for any over this) are correct. Key points for simplified expenses:
If you are self-employed, you claim the entirety of your business mileage as tax relief on your Self Assessment tax return (Mileage allowance payments would not be relevant)
There are two ways, both requiring very basic math:
You can. Yes. If you are registered for VAT. But not the entire amount. I'll let the right honourable HMRC elaborate on this.
Yes. If you are self-employed then you can claim the cost of buying a van as an allowable business expense. Great! This will lower your taxable profit, but you need to consider how you pay your taxes:
No one enjoys calculating car mileage, especially at the end of tax years when you have mounds upon mounds of receipts. Calculating car mileage is just another time vacuum that freelancers simply don't need. You just want to be creating. We get it. And TAXO'D wants you to be creating too.
That's why TAXO'D are 100% focused on taking away your tax woes and making your tax experience ... well non-existent!
TAXO'D tax return software does all the math for you, we will show you what tax you owe and when you need to pay it. We will even file your tax return in our tax filing app direct to HMRC at the touch of a button.
If we can save you any money along the way, we will. We will make sure you are getting all the relief you are entitled too and advise you on any tax-saving suggestions (all within the app) TAXO'D personal tax app can also be accessed from all devices. Computers, tablets and smartphones, meaning you can record your expenses and income on the move.
And when it comes to recording business mileage TAXO'D is particularly awesome - Claiming car mileage allowance and business travel expenses is easy with TAXO'D mobile tax tool and is just one of the areas that our powerful Self Assessment software can help you self-employed heros and freelancers with all your taxes.
Disclaimer: This is simply a guide and should not be treated as tax advice. Contact HMRC directly if you need tax advice.