This is part one of a series of three updates on business travel. This is a hugely complicated part of business life, and clients constantly ask us for advice and guidance.
In this post we are going to concentrate on claiming mileage for business travel you make using your personal car.
When can you claim business mileage?
- When you make legitimate business trips in your car
- Never claim for travel from your home to your business premises
- If you have a temporary workplace you can only claim if you are likely to be there for less than 24 months – beyond that HMRC see it as your permanent place of work
What records do you need to keep?
- Keep a note of the full details of the journey – when you travelled, the reason for travel, and how many miles you travelled.
- Mileage does not have to be exact, you can use Google Maps or AA Route Planner to give you a rough estimate
- You can use a simple monthly spreadsheet, a myriad of apps that are available, some of which integrate with online accounts software, or, if you are using Xero or FreeAgent, they have mobile apps that can be used directly to record mileage.
How much can you claim?
You can claim as much as you want to, but there are tax implications if you choose to pay more than the approved HMRC rate. The approved rates are currently 45p per mile for the first 10,000 miles, and 25p thereafter.
You should note that the mileage is calculated on the tax year, so if your business accounting year does not align with the tax year, you will need to be careful. The online accounting software is better at handling this, and will save you getting in a muddle with spreadsheets.
If you choose to pay over the HMRC rate, the additional amount is taxed as a payment in kind. The company has to disclose it in the annual P11D and pay employer National Insurance (NIC). The tax (PAYE) would also be deducted from the employee’s salary.
How should claims be handled?
Make sure the company has a robust process in place for handling business mileage. Each employee should submit an expense claim, which should be approved by the line manager before payment. Of course, where there is only one employee (including the director or owner of the business) this can be dispensed with.
If you are using FreeAgent you can use “My Expenses” or in Xero it is “New Expense Claim”.
What else can you claim?
- If you are carrying passengers on a business trip you can claim an additional 5p per mile per passenger
- Parking fees
- Congestion charges and tolls
There are some additional reporting requirements for the employer, if parking fee, congestion charges and toll expenses are reimbursed to the employee.
We will cover other travel expense claims in a later post.
If you would like help with setting up business mileage or expenses for your company, please contact us on 01256 406 601.