What Is Business Mileage And How Do You Claim It?
Driving to deliver goods, meet clients or just commuting between work sites can quickly rack up costs, especially for larger fleets.
Driving to deliver goods, meet clients or just commuting between work sites can quickly rack up costs, especially for larger fleets.
Simon Pavey
Website Marketing Manager
Businesses can be affected by frequent, short journeys too. But, there are ways to reduce travel costs within your business expenditure.
HM Revenue & Customs (HMRC) grants each company vehicle a ‘business mileage allowance’ for professional use. There are, however, rules that could affect your eligibility. The way your business is structured can also have an impact.
Business mileage refers to the distance a vehicle travels for work-related purposes, excluding personal trips. This includes travel to meetings, client visits, business errands, and other activities directly related to one's job or business operations.
Only the miles driven for business purposes are considered when calculating business mileage, while personal driving is not counted. Many businesses and self-employed individuals track their business mileage to claim tax deductions, as the IRS allows for a standard deduction per mile driven for business purposes. They may also choose to calculate actual expenses.
Accurately tracking business mileage is essential for financial and tax purposes, here is our guide to mileage tracking.
You must clearly distinguish between ‘professional use’ and ‘personal use’. Ensuring your fleet drivers understand what mileage can be claimed on the business mileage allowance makes the process of claiming it much easier.
Some employees and business owners only use company vehicles. Using a company vehicle this way falls into professional use quite comfortably.
For employees who take their company vehicle home with them for use in their own time, personal and professional mileage must be separated and reported as such. Journeys such as commuting to and from work will not qualify for tax relief as this is not considered professional use.
No, you don’t necessarily need business car insurance to claim mileage for tax purposes, but it's highly recommended.
The IRS allows individuals to claim mileage for business-related travel even if they have personal car insurance, as long as they use it for work-related purposes.
However, personal auto insurance may not fully cover accidents or damage during business use, which is where business car insurance becomes essential.
Business car insurance provides additional coverage tailored to the risks of using a vehicle for work-related tasks. If you're regularly using your car for business, having the proper insurance is crucial to protect yourself and ensure you're adequately covered in case of an accident. Always check with your insurance provider to ensure your coverage meets your needs.
As you claim fuel expenditure under a company car’s mileage allowance, the AFR pricing table is a helpful guide when setting a fuel expense policy for your business. This will help you feel confident that your policy is fair and cost-effective for everyone involved.
In some fleets, drivers pay for their own fuel and then claim the mileage allowance they are owed on their Class 1 National Insurance contributions, up to the thresholds we have outlined above. Alternatively, a company can pay for the fuel while reclaiming the tax themselves.
Whatever the case may be, a robust payment record is essential.
The HMRC requires that you supply all receipts and records of all fuel expenditures. Fleets with personal and company vehicles must keep track of and ensure their records are HMRC compliant. Generally, there needs to be a set of dates, figures and total mileage to claim back everything you’re due.
You can claim business mileage from home, but the rules are more specific.
The IRS generally considers your commute between home and your regular place of work as personal miles, not deductible. However, suppose your home is your primary place of business (e.g., a home office) or you're travelling to a temporary work location or for a specific business purpose directly from your home. In that case, those miles may be considered business-related.
For instance, if you leave your home office to attend a client meeting, the mileage from your home to the meeting would qualify as business mileage. Similarly, those trips can be deductible if you travel to different work sites throughout the day.
Document the purpose of each trip and maintain a detailed log to ensure compliance with IRS rules. If you're unsure about your specific situation, consult with a tax professional to ensure you're accurately tracking and claiming your business mileage.
Tracking business mileage is crucial for accurate record-keeping and maximising tax deductions.
One common method is to maintain a mileage log, in which you manually record each trip’s date, starting and ending odometer readings, destination, and purpose.
Alternatively, you can use mileage tracking apps which automatically track trips using GPS and categorise them as either business or personal. These apps generate easy-to-read reports and can simplify tax filing.
For a more traditional approach, you can calculate mileage by noting the odometer reading at the start and end of each trip, then subtracting the start reading from the end. In addition to mileage, it’s essential to track the purpose of each trip, as the IRS requires this information for business deductions.
If your business involves significant travel, telematics systems—automated vehicle tracking systems that use GPS and other data—can be another helpful tool. These systems monitor the distance travelled and the vehicle's usage, fuel consumption, and maintenance needs. Many businesses use telematics to ensure accurate mileage records and optimize their fleet's efficiency. Lastly, you must stay updated on the IRS standard mileage rate, which varies yearly, to calculate your deductions correctly.
If you’re thinking of introducing telematics to your business, read our article talking about creating a business case for introducing telematics.
Cars and vans that are classed as ‘personal’ (i.e. owned by a member of your fleet staff) can claim back a mileage allowance of 45p for the initial 10,000 miles in a single tax year. Anything above this threshold can be reclaimed at 25p per mile. This policy is also designed to cover maintenance.
Motorcycle owners can claim back 24p per mile, which remains the same regardless of how far they travel in the financial year.
It doesn’t matter if an employee uses more than one ‘personal’ vehicle in a single year; the tax is calculated using the combined mileage of all of their cars.
By contrast, a ‘company’ vehicle claims relief based on fuel expenditure. The amount you can claim varies depending on the type of fuel used, as well as the size of your engine:
*Advisory Fuel Rates from June 2023
It’s also important to note that these numbers aren’t static. They’re dictated by AFR (Advisory Fuel Rates) from the Treasury. Global fuel trends cause them to fluctuate; therefore, checking back every three months to see if the figures have changed is worthwhile.
Learn more about mileage expenses here.
*Advisory Fuel Rates from June 2023 (Diesel)
As you can see from the second table, the rates change for diesel vehicles. Most notably, the biggest change is in the engine size, which stands at 1600cc or less, 1601 to 2000cc, and over 2000cc, respectively.
Looking to make savings on fuel,? Check out our fuel card options.
While it’s ultimately your decision regarding how employees use their fuel cards, setting out a clear policy and tracking their usage is essential. Mileage Expenses records report every mile of every journey in any vehicle to help reduce your mileage claims by up to 21% and save valuable admin time for your drivers.
Mileage Expenses is easy for drivers and managers to use – get in touch today to learn more!
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