Calculate Business Mileage Using HMRC’s Rates For 2018
If you use your personal car for work-related journeys, you can claim tax back on your mileage using the current HMRC mileage rate. Here’s a look at the mileage rates for 2018 and a rundown of how to use them to calculate your business mileage deduction.
What are the standard mileage rates for 2018?
The current HMRC mileage rates, called Approved Mileage Allowance Payments or AMAP are:
|Type of Vehicle||First 10,000 Miles||Above 10,000 Miles|
|Cars and Vans||45p||25p|
What were the standard mileage rates in 2017?
During 2017, HMRC’s AMAP rates were the same as the current ones. In fact, the last time HMRC revised the mileage rates was in 2012.
The government doesn’t have any immediate plans to revise the AMAP rates. However, it recently ran a public consultation on the impact of current rules on taxation of employee expenses. And this may lead to future changes in government policy and, in turn, to changes in HMRC’s rules.
What does the current HMRC mileage rate cover?
HMRC’s AMAP rates cover the costs of running and maintaining your vehicle, including:
- Fuel, servicing (including your annual MOT) and repairs
- Car insurance
- Vehicle Excise Duty (VED)
- Depreciation (your vehicle’s reduction in value over time due to wear and tear).
Is there anything the current HMRC mileage rate doesn’t cover?
HMRC’s AMAP rates don’t cover incidental expenses you’ve incurred on a particular journey, including:
- Motorway tolls
- Parking fees
- Congestion charges
- If you’re self-employed and VAT-registered, VAT on these costs. You have to register for VAT if your annual turnover is more than £85,000.
You can only claim these expenses over and above your mileage allowance if you’ve incurred them “wholly and exclusively” for business reasons. In other words, you can only claim these costs back on business journeys.
What if I carry a passenger with me on a work-related journey?
If you carry passengers with you on work-related travel, your employer can pay you a tax-free passenger allowance in addition to your mileage allowance. At the moment, the allowance is 5p per mile per passenger. Unfortunately, you cannot claim the passenger allowance on your tax return if your employer doesn’t pay it (or pays less than 5p per mile per passenger).
When can I claim a mileage deduction using HMRC’s current mileage rates?
You can claim a mileage deduction using AMAP rates if:
- You’re employed or self-employed (HMRC considers you to be employed even if you work for yourself but do business as a limited liability company)
- You use your personal vehicle to make business journeys (if you have a company car, different rules apply)
- You haven’t claimed your vehicle’s purchase price as a capital allowance
- You claim your mileage deduction using AMAP rates every year. You cannot use AMAP rates in one tax year and a different method in another year. You can only change the method if you change your car.
My employer pays part of my mileage costs. Can I still claim a mileage deduction?
Yes. If your employer pays you less than the AMAP rate, you can claim tax back on the difference. So, if your employer pays 35p per mile and the applicable AMAP rate is 45p per mile, you can claim tax back on the remaining 10p per mile.
What counts as a business journey?
HMRC has two tests to help you decide when journeys are business-related and when they aren’t.
As a rule, a journey is business-related if:
- You can’t do your work unless you make the trip. This usually applies when driving is one of your main job responsibilities, for example, because you’re a delivery person or a lorry driver.
- You need to be somewhere other than your usual workplace in order to carry out your duties. This usually applies in cases where you work at a set location but have to travel for a work-related reason such as a client meeting or to run a business-related errand.
The following trips don’t count as business journeys:
- Commuting, that is travelling between your permanent office and your home or another location which isn’t a workplace
- Work-related journeys in which your destination is geographically very close to your permanent workplace, for example, because it’s on the same street.
- Journeys in which your primary purpose isn’t work-related
- You cannot turn a private journey into a business journey by stopping to run a work-related errand on the way. If the primary purpose of your journey is personal, the journey is a personal journey.
How to calculate your mileage deduction using the standard mileage rates for 2018
- Step 1: Keep a record of all the business journeys you make during the tax year. You can do this manually or, even better, use an app such as MileIQ. This tracks all your drives automatically, so you won’t miss any mileage by mistake
- Step 2: Tot up your business mileage for the year
- Step 3: Multiply your business mileage by the applicable AMAP rate
- Step 4: Claim the answer in step 3 using Form P87. Alternatively, if you’re self-employed or you’re claiming more than £2,500 for a single tax year, you’ll need to file a self-assessment tax return.
Calculating your mileage deduction: Example
During 2017 / 18, you racked up 30,000 miles on your private car. You used up 15,000 miles on personal journeys, while the remaining 15,000 were business miles.
According to the current AMAP rates, you can claim 45p per mile on the first 10,000 business miles and 25p per mile on anything over this limit.
So, to calculate your mileage deduction, you’d multiply your mileage as follows:
(10,000 x 45) + (5,000 x 25)
This means your total mileage deduction for 2017 / 18 would be £5,750. Since the amount is more than £2,500, you’ll have to complete a self-assessment tax return to claim the deduction.
Do I need to keep a mileage log to claim a mileage deduction?
Yes, keeping a mileage log is super important. You don’t have to submit a mileage log when you claim your mileage deduction. However, HMRC can ask to see your records, and you can get hit with a penalty if they deem your records inaccurate or incomplete.
You’ll also have to pay interest on any tax you underpaid.
What should my mileage log look like?
HMRC doesn’t have any hard and fast rules on what your mileage log should look like. Which means you can keep your records using whichever method you prefer: paper, an online document, a spreadsheet or a mileage tracking app such as MileIQ.
That said, your records need to show that “you’ve reported accurately and your end-of-year forms are correct.”
Your mileage log should contain at least the following information:
- The date of each journey
- Whether you travelled for business or personal reasons
- Your journey’s starting point and end point
- The total number of miles travelled on each journey.
How long should I keep a mileage log for?
You should keep your mileage log (and any other tax records) for at least five years from the date you submit your self-assessment tax return. The deadline to submit a self-assessment tax return is the 31 October if you submit a paper return and 31 January if you submit it online.
Can I claim business mileage on my taxes using a different method?
Yes. Applying HMRC’s current mileage rate to your business mileage is the simplest and most straightforward method. Alternatively, you can also claim a mileage deduction using the actual expenses or full cost method. This involves more work, but can sometimes result in a bigger mileage deduction.
When can I use the actual expenses method?
You can only use the actual expenses method to claim a mileage deduction if you’ve never claimed using the AMAP rates. You can only switch method if you change your vehicle.
How to calculate a mileage deduction using the actual expenses method
- Step 1: Tot up the cost of fuel, servicing, car insurance, VED and the cost of any repairs you made during the tax year.
- Step 2: Find out your business use percentage. To do this, divide your business mileage by your total mileage and multiply by hundred.
- Step 3: Multiply the total in step 2 by the percentage in step 3 to find your total mileage deduction
- Step 4: Deduct the full cost of any tolls, parking fees or congestion charges you’ve incurred on a business journey.
Mileage deduction using actual expenses: Example
In 2017 / 18, you spent £5,000 on fuel, servicing, car insurance and VED. You also spent £500 on repairs. This means you spent £5,500 in total.
Your total mileage for the year was 30,000. 21,000 were business miles, while 9,000 were personal miles. This means your total business usage was 21000/30000 x 100, that is 70 percent.
So, you can claim 70 percent of your total costs, that is £3,850.