Claiming Vehicle Expenses: HMRC Guidelines

As a UK employee or self-employed person who uses your personal vehicle for business purposes, you may be able to claim mileage expenses on your tax return in accordance with HM Revenue & Customs (HMRC) guidelines. Understanding the process and requirements is crucial to avoid mistakes and potential penalties. Here’s a step-by-step guide to help you navigate the process with ease:

Step 1: Keep Accurate Records

The first step to claiming vehicle expenses is to maintain accurate records of your business trips. Keep track of the date, destination, purpose, and number of miles traveled for each trip. You can use a mileage logbook, or a spreadsheet, or take advantage of a mileage tracking app like MyCarTracks, which simplifies record-keeping and generates reports for downloading.

Step 2: Calculate Your Mileage Expenses

Once you have accurate mileage records, it’s time to calculate your mileage expenses. There are two methods you can choose from:

The Fixed Rate Method
The fixed-rate method is straightforward. Multiply the number of business miles traveled by the HMRC-approved mileage rate. Currently, the rate is set at 45p per mile for the first 10,000 miles and 25p per mile thereafter.

The Actual Cost Method
The actual cost method involves calculating the real costs associated with running your vehicle, such as fuel, insurance, repairs, and maintenance. Claim a portion of those costs based on the proportion of business miles traveled.

Step 3: Fill in the Correct Forms

If you’re an employee, your employer should complete a P11D form to report expenses and benefits, including mileage expenses. This form must be submitted to HMRC annually by July 6th. However, if you received reimbursement at a rate lower than the approved mileage rates, your employer can include this amount in your earnings and report it on your P60 form at the end of the tax year, eliminating the need for a separate P11D form for that specific reimbursement.

For self-employed individuals, report your mileage expenses on your self-assessment tax return. Utilize the self-employment section to claim business-related expenses, including mileage expenses. Provide details of your business mileage, the total number of business miles traveled, and the amount claimed for mileage expenses. Calculate your mileage expenses based on the HMRC-approved mileage rates.

Note that the HMRC-approved mileage rates for the tax year 2022/2023 are as follows:

Cars and vans:
– First 10,000 miles: 45 pence per mile
– After 10,000 miles: 25 pence per mile
Motorcycles: 24 pence per mile
Bicycles: 20 pence per mile

Remember, these rates cover various costs associated with running a vehicle, such as fuel, insurance, maintenance, depreciation, and general wear and tear. These rates are applicable only to business mileage and cannot be claimed for personal or commuting mileage.

Step 4: Maintain Records for at Least 5 Years

It’s important to keep records of your mileage expenses for at least 5 years in case HMRC requests them for an audit. Retain all receipts, invoices for fuel, repairs, and maintenance, as well as your mileage logbook or tracking app records.

Simplify your mileage tracking process and stay compliant with HMRC guidelines using MyCarTracks. With accurate record-keeping and easy-to-generate reports, MyCarTracks is your reliable partner for hassle-free vehicle expense management.