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Kristian Charles Williams

Kristian Charles Williams

Jan 19, 2021

Business Mileage Allowance for Freelancers and Self-Employed.

Car & Petrol Allowances 2021. UK Business Mileage Rates 2021

Car Mileage allowance for freelancer

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.

What counts as ‘business mileage’?

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:

  • delivering orders;
  • transporting goods;
  • business trips to clients and partners;
  • travelling to a temporary workplace.

How much can I claim for business mileage?

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 ;-)

What are the business milage rates in 2021?

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. 

TAXO'D blog - Car Mileage Allowance

Can an employer pay towards my business mileage? and what are MAPs?

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)

Can I claim tax relief on vehicle running costs and MOTs?

No. You cannot claim separately for vehicle running costs and MOTs, as the business mileage rate of 45p a mile covers these expenditures. 

What is the Self Employed Mileage Allowance?

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:

  • Cannot be used by limited companies
  • Can be used by Self-employed, business partnerships sole traders

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)

How do I claim business mileage with HMRC?

There are two ways, both requiring very basic math:

  • If using flat rates then you multiply your number of business miles by the flat rate (45p for first 10,000 miles, 25p thereafter), and claim on the total of this. 
  • If you are not using flat rates, you will need to claim the overall figure for the costs involved in purchasing and running the car.

Can I claim VAT on mileage?

You can. Yes. If you are registered for VAT. But not the entire amount. I'll let the right honourable HMRC elaborate on this.

I need a van for work. Can I claim it as a business expense?

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:

  • If you use traditional accounting, you can claim your van as a capital allowances if you buy it outright.
  • If you use cash basis accounting, you can still claim your van as capital allowance but all other business purchases (parking, fuel etc) must be claimed as an allowable expense.
TAXO'D blog - Car Mileage Allowance

This seems like a lot of effort. There must be an easier way to claim business car mileage?

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!

Why not let TAXO'D tax return app for freelancers handle all of your tax woes?

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.

Sign up today for TAXO'D mobile tax tool

Disclaimer: This is simply a guide and should not be treated as tax advice. Contact HMRC directly if you need tax advice.

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TAXO'D blog Author

Kristian Charles Williams

Head of Growth, Partnerships & Mugician

A freelance human and one that resides in creative industries. For the best part I have been an independent musician and a (not-so-independent) composer.

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