Tax efficient business mileage options

So you or your employees are making business trips in your own vehicle, so as a business owner how do you get tax relief on this expense in the most tax efficient method or as an employer how do you reimburse your employees efficiently. Every situation is slightly different, so below is a general outline.

Company Cars

Tax

Your company could provide you or your employees with a company car and pay for all the business fuel. But unless you provide a car with low emissions this will attract a heavy benefit in kind tax and national insurance and so is normally not tax efficient, so normally the best method is to make a mileage expense claim. 

Make an expense claim

HMRC says that a business can pay an employee 45p per business mile on the 1st 10,000 miles they travel in a year, after this it is 25p per mile. The good news is that this can be paid tax free, anything above these amounts will incur tax and national insurance.

What is business travel?

Tax

Travel from home to a fixed place of work is not classed as business travel, unless it is to a temporary place of work. For a journey to count as business travel it must form part of an employee’s duties. If you claim for personal mileage you will pay tax and NI on the claim as it is deemed to be another form of salary.

 

VAT

If your business is VAT registered, VAT on the fuel element of the mileage charge can be reclaimed. For example on current rates, a 2000cc petrol engine would give VAT of £4.33 per 100 business miles travelled. In order to do this you must have a detailed mileage record and keep all fuel receipts.

 

The fuel element of the mileage charge is determined by the engine size, HMRC issues these rates quarterly and you must use the current rate.  These can be found by looking at www.hmrc.gov.uk and searching for Company Car Advisory Fuel rates.

 

If you have any questions, would like anymore information or if you would like a copy of our suggested mileage claim form feel free to contact us for some free advice.