Whether you’re self-employed or work for someone else, you have to pay National Insurance contributions (NICs). Your contributions go towards certain state benefits, including your state pension.
Category: Self Employed
UK drivers spend a lot of time on the road. According to the latest government statistics, British vehicles rack up 324 billion miles a year.
Luckily, if the drive is for business purposes, you can claim tax back from HMRC. With this in mind, here’s a definitive look at the UK’s business mileage-allowance rates for 2019. We’ll also show you how to calculate your mileage deduction.
What are the business mileage rates for 2019 in the UK?
The latest business mileage rates, or Approved Mileage Allowance Payments (AMAP) are:
|Type of Vehicle||First 10,000 Miles||Above 10,000 Miles|
|Cars and Vans||45p||25p|
You can also claim an extra 5p per mile if you have a passenger with you on a business drive.
The rates apply for any business journeys you make between 6 April 2018 and 5 April 2019. They’re identical to the rates that applied during 2017-18. In fact, the last time AMAP rates changed was in April 2012, when the AMAP rate for the first 10,000 car and van miles rose from 40p per mile to 45p per mile.
Who can claim tax back on business mileage using the AMAP rates?
You can claim a business mileage allowance using AMAP rates if you:
- Are employed or self-employed (this holds true whether you’re a sole trader, a partner in a partnership or do business as a limited liability company). If your employer pays your business mileage costs but the amount is lower than the AMAP rate, you can claim tax back on the difference.
- Use your personal car for business-related travel (company cars have different rules, which we’ll deal with in a minute).
- Haven’t claimed any capital allowances on your vehicle.
- Claim your business mileage deduction using AMAP rates every year. You can switch to a different method only if you get a new car.
A journey counts as business travel if:
- You have to go somewhere other than your usual workplace to do your job, for example, because you’re meeting a client at their office.
- Driving is part of your day-to-day duties, for example, because you’re a bus driver.
The following DO NOT count as business journeys:
- Travelling to a location that’s close to your workplace. So, if a client’s office is next door to yours, driving from home to the client’s office wouldn’t count as a business journey.
- Trips in which your main purpose isn’t work-related.
- And no, you can’t turn a personal trip into a business journey by stopping to run a work-related errand on the way.
With that out of the way, let’s take a more in-depth look at AMAP rates.
What do the AMAP rates cover?
AMAP rates cover the cost of running and maintaining your vehicle. This includes:
- Fuel, servicing and maintenance (including your MOT) and any repairs
- Car insurance
- Road tax (vehicle excise duty, or VED)
- Wear and tear
AMAP rates DON’T cover:
- Motorway tolls
- Parking fees
- Congestion charges
- Other incidental expenses
You can claim tax back on these expenses in addition to the AMAP rate if you can show you’ve made them ‘wholly and exclusively’ for business purposes. This means:
- You incurred the expense purely for business reasons. This would apply if you had to pay for parking when visiting a client’s office
- There is some personal use, but you can show you used a ‘definite proportion’ of the expense ‘wholly and exclusively’ for business purposes. So, if you were in a client meeting for 3 hours then went to Starbucks for a natter with a friend, you could claim only the first 3 hours of parking
How to calculate your business mileage deduction: Example 1
Once you have this information in hand, calculating your business mileage deduction is very straightforward.
Let’s say you’re self-employed. Your total taxable profit (your income after deducting allowable expenses) is £40,000.
You’ve travelled 14,000 miles by car. 3,000 were personal journeys and the remaining 11,000 were business-related.
So, you’d calculate your mileage deduction as follows:
- Multiply the first 10,000 by the current AMAP rate of 45p. This gives you £4,500
- Multiply the remaining 1,000 by the current AMAP rate of 25p. This gives you £250
- Add £4,500 and £250 to get the total of £4,750
- Deduct £4,750 from your total taxable profit. This means you’ll pay tax only on £35,250
How to calculate your business mileage deduction: Example 2
Now, let’s say you’re an employee. You’ve racked up 10,000 in business mileage on your personal car. Your boss reimburses you at a rate of 35p per mile.
In this case, you can claim tax back on the difference, which is 10p per mile.
This means you can deduct £1,000 from your taxes (10,000 multiplied by 10p).
How do I claim my mileage deduction?
Claiming your mileage deduction is easy. If you’re self-employed, include the mileage deduction in your self assessment tax return. If you’re employed, you can claim using Form P87. Do note, however, that you’ll have to file a self assessment tax return if you’re claiming more than £2,500.
What if I drive a company car?
HMRC’s business mileage rates don’t apply to company cars. A company car is a vehicle that:
- Belongs to your employer (or, if you’re self-employed, to your limited liability company)
- You take home with you
- You use for both business and personal journeys
HMRC considers a company car to be a benefit-in-kind. This means you can’t claim a mileage deduction on your tax return. Instead, you actually pay tax on the car.
How much tax do I pay on a company car?
The amount of tax you pay on your company car depends on:
- The car’s taxable value. This is also known as the P11D value, and you can calculate it using HMRC’s company car and car fuel benefit calculator
- Carbon dioxide emissions (CO2)
- Engine type (whether it’s petrol, diesel, hybrid or electric)
- Which income tax bracket you fit into
The company car tax rates (also known as BiK rates) for 2018-19 are:
|CO2 Emissions||% of P11D - Petrol||% of P11D - Diesel|
|0 - 50||13||16|
|51 - 75||16||19|
|76 - 94||19||22|
|95 - 99||20||23|
|100 - 104||21||24|
|105 - 109||22||25|
|110 - 114||23||26|
|115 - 119||24||27|
|120 - 124||25||28|
|125 - 129||26||29|
|130 - 134||27||30|
|135 - 139||28||31|
|140 - 144||29||32|
|145 - 149||30||33|
|150 - 154||31||34|
|155 - 159||32||35|
|160 - 164||33||36|
|165 - 169||34||37|
|170 - 174||35||37|
|175 - 179||36||37|
Paying tax on a company car: Example
Let’s say your boss gives you a company car with a P11D value of £15,000. It has a petrol engine and emits 75 grams of CO2 per kilometre. You pay tax at the basic rate of 20 percent.
To find out the tax due, you’d do the following:
- Multiply the car’s P11D value by the BiK rate
- In this case, you’d multiply £15,000 by 16 percent (since the car has a petrol engine and emits 75 grams of CO2 per kilometre)
- This would give you £2,400
- Your highest rate of income tax is 20 percent, so you’d pay only 20 percent of £2,400, that is £480
So can’t I claim any of my company car expenses?
Well, yes you can. While you can’t use AMAP rates, you can claim tax back on the fuel you burn on business journeys using HMRC’s advisory fuel rates.
HMRC updates the advisory fuel rates every quarter. However, you can use the old rates for up to a month after they’re updated.
The latest advisory fuel rates, which kicked in on 1 December 2018, are:
Advisory Fuel Rates for Petrol
|Engine Size||Petrol - amount per mile|
|1400cc or less||11 pence|
|1401cc to 2000cc||14 pence|
|Over 2000cc||21 pence|
Advisory Rates for Diesel
|Engine Size||Diesel - amount per mile|
|1600cc or less||10 pence|
|1601cc to 2000cc||11 pence|
|Over 2000cc||13 pence|
These are treated the same as vehicles with petrol or diesel engines
4p per mile
How do I claim tax back using advisory fuel rates?
To claim tax back on your company car fuel using advisory fuel rates you must:
- Pay all fuel costs out of your own pocket
- If your boss (or your limited liability company) pays your fuel costs, but the rate is less than the advisory fuel rate, you can claim tax back on the difference
Claiming tax back on fuel: Example 1
As with claiming tax back on business mileage using the AMAP rates, claiming tax back on fuel using advisory fuel rates is fairly straightforward.
Let’s say you have a Vauxhall Corsa with a 1.4 petrol engine. You rack up 13,000 miles, of which 10,000 are business miles and the rest are personal journeys.
Based on the latest fuel advisory rates, you could claim 10,000 miles at 12p per mile, that is £1,200.
Claiming tax back on fuel: Example 2
Now, let’s say your boss reimburses you for fuel at a rate of 6p per mile. This means you can claim tax back at a rate of 6p per mile, that is £600.
And don’t forget to keep detailed records of your mileage. You never know when HMRC will ask to see them!
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