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Introduction
As a UK limited company contractor, do you incur business mileage for company journeys in your own private car? If you do, you may use your private car for business journeys during the week. Therefore, what do contractors charge for mileage and what is claimable for company mileage rates (UK) under present rules? Basically, the good news is you may be able to claim business mileage allowance relief. However, when you’re UK contracting, you can only make mileage claims if the journeys meet specific criteria. Also, HM Revenue & Customs (HMRC) have set UK mileage rates which you use to make a HMRC mileage claim for business journeys in your private car. It’s also worth noting the HMRC business mileage rates under a system called AMAPs, are set at a fairly generous level. Indeed, the HMRC mileage rates aim to re-compensate you for all your private vehicle running costs.
As a contractor and small business owner, you may undertake contractor travelling on a regular basis. If you do, you’ll incur contractor mileages for business journeys. Therefore, it’s key to be aware of what you can expense for your contractor travel costs. It’s also important to know how to go about claiming mileage as a contractor when you make journeys in your own vehicle. In this guide, we’ll research contractor and consultant mileage rates in the UK. We’ll look at how mileage allowance payments work and research VAT on mileage rates. What’s more, we’ll investigate the UK contractor mileage rate 2023. As part of this, we’ll find out when you can claim mileage allowances for your contractor travels. Furthermore, we’ll discover which contracting journeys you can expense a mileage reimbursement (UK) for. Finally, we’ll discover how to go about claiming tax relief on mileage expenses.
Initial thoughts
The benefits of making a business mileage claim
If you meet the set criteria, you can claim for mileage under the AMAPs system in respect of car or van business travel. Therefore, once you have worked your business mileage expenses out and as part of your claim for business mileage:
- Your business will receive tax relief on your UK mileage claim.
- Your company can reimburse you for the business mileage expense.
Common questions
Many UK contractors and small business owners will ask questions around their business mileage. Indeed, they will enquire when they can make a business mileage expense claim. These include:
- What is business mileage?
- What counts as business mileage?
- How much can you claim for mileage?
- What journeys count as business mileage?
- How much mileage can I claim?
- How to expense mileage?
- What can I charge for mileage?
- How to claim mileage allowance relief?
- How to claim mileage on Self Assessment tax return?
Therefore, in this guide we’ll take a look at the HMRC AMAPs system and UK business mileage rules. What’s more, we will consider the rates available and how to claim back mileage allowance. In summary we’ll look at how this all works for UK contractors.
HMRC Business mileage allowance (UK) -how to expense this
You may need to travel daily to your contract site when you are a UK contractor with your own company. Many limited company contractors travel in their own car and when they do, they can expense their mileage at a flat rate tax-free for the business use of their private vehicle. The company mileage claim can then be treated as a business expense and your company will receive mileage tax relief.
You may need to travel daily to your contract site when you are a UK contractor with your own company. Many limited company contractors travel in their own car and when they do, they can claim mileage at a flat rate tax-free for the business use of their private vehicle. The company mileage claim can then be treated as a business expense and your company will receive mileage tax relief.
The HMRC approved rates (AMAPs)
Both company directors and employees can claim back mileage for business journeys. They will claim the business mileage from their employer as travel expenses. In terms of UK mileage reimbursement for contractors, when you run your own business, you will claim the UK mileage allowance from your contractor limited company.
If you are an employer, you can reimburse employees under the HMRC Approved Mileage Allowance Payments rates (AMAPs). If you pay more than HMRC approved mileage rates, the extra will need reporting on forms P11D. Alternatively, as an employer, you can choose to pay your employees less than the HMRC AMAP rates. However, when an employee is claiming mileage from employer and the employer pays less than 45p per mile, the employees can claim the difference up to the HMRC approved amount for the company mileage rate, via their Self-Assessment tax returns at the end of the tax year.
Perhaps you may be concerned about looking after the environment. If this sounds like you, and where practical, you may decide instead to travel to your contract site by bike or motorcycle. In addition, you can also claim for a company mileage allowance under the AMAPs rates when you travel by these methods.
The Fixed Profit Car Scheme (FPCS)
Contractor mileage rate 2023 -the available rates
The business mileage expense you can claim while contracting is payable under HMRC’s Fixed Profit Car Scheme. The HMRC mileage scheme provides flat rate UK mileage rates and is also known as the Approved Mileage Allowance Payments (AMAPs) system. Indeed, the HMRC mileage allowance rates do increase from time to time. However, these rates in respect of mileage reimbursement rate for independent contractors have been at the same level for several years now.
Besides car mileage, there are also fixed rates available for contractor mileage allowances in respect of journeys by bicycle and motorcycle. Indeed, you can use the rates below to claim expenses for mileage in respect of bike or car/van travel. Therefore, the business mileage rates that you can claim under the HMRC-approved mileage rates scheme are currently:
| HMRC mileage rates since 2011/12 | Rate per mile for the first 10,000 business miles in the tax year | Rate per mile for each business mile over 10,000 in the tax year |
|---|---|---|
| Cars and vans | 45p | 25p |
| Motorcycles | 24p | 24p |
| Bicycles | 20p | 20p |
The level of allowance for mileage above under AMAPs applies to use of an employee’s private vehicle for business.
Furthermore, if you run a company car, you can claim for advisory fuel rates and the HMRC website gives further details on this.
To summarise
Therefore, to reiterate, for cars and vans the HMRC rate per mile payable under the Fixed Profit Car Scheme via AMAPs are:
- A HMRC business mileage rate (UK) of 45p per mile for the first 10,000 miles you travel in the tax year.
- The HMRC business mileage rates claim then reduces to a business mileage rate (UK) of 25p for each mile after that in the same tax year.
Calculate mileage claim
To calculate how much you can claim, you can multiply the number of business miles by the applicable company mileage rates. In turn, this will give your HMRC business mileage. What’s more. your company can reimburse you for your contracting business mileage claims. Indeed, it can do so by using the HMRC mileage rates on a regular basis.
The HMRC car mileage rates of 45p for the first 10,000 miles and after this the rate is 25p. These official rates are in place for your business contractor journeys and are set at a generous level. The reasoning behind the level of these rates enables your employer to reimburse you for all your running costs. The business mileage rates / mileage tax allowance is set at such a level so as to re-compensate you for your vehicle’s running costs. This includes the overall wear and tear, fuel, repairs, servicing and maintenance, insurance, and road fund tax. Therefore, when you expense car mileage at the approved mileage rates (HMRC) via your business, you cannot claim for any other private car running costs.
Besides claiming business mileage expenses under the Fixed Profit Car Scheme, the only other car-related costs that UK contractors can claim when using their private vehicle for business journeys are parking fees and road tolls.
Further considerations around the HMRC Business mileage allowance
The types of contractor journeys that you may undertake
Besides travelling to your contract site, there may be other journeys that you undertake for business purposes. As a result, if you can claim for your contract site and other company journeys, you can make a business mileage claim for such trips at the official car allowance mileage rates under AMAPs. What’s more, such other business journeys could include:
- Travel to a hotel or B&B where you are staying away overnight in connection with your work. You might also drive to a flat or house you rent while on contract.
- Attend training courses.
- Visit a recruiter.
- Visit your contractor accountant.
- Visit a financial advisor or pension advisor.
- Visit the bank.
- A trip to buy company supplies.
There may come a time when you obtain a contract so far away that it is not practical to either travel there and back each day or stay away during the week and travel back at weekends. In this case, you may consider relocating permanently, and there are certain areas to consider here.
Mileage logs to record your contracting journeys for your business
Keeping a log of your company mileage journeys when you are claiming mileage expenses is essential. Therefore, when you are recording business mileage your log should include dates, starting and finishing locations, and the number of miles. You will need to do this just in case HMRC asks to see your business mileage at a later date. The record can be electronic or on paper. However, you must keep a log of this.
When HMRC performs an inspection, this will include checking all of your expenses and claims for mileage. This will be to make sure that these are all in order. Therefore, it is essential to keep receipts and relevant business mileage records to back up any claims made from your business. Consequently, it is key that you retain any relevant records for both you and your employees.
HMRC and reimbursing your business mileage
You may have just started UK contracting, and your company does not yet have funds. If this is so, you have two choices when it comes to reimbursing your car mileage allowance (HMRC) claims:
- Wait until your company has generated some funds. Once these are in your bank account, you can reimburse yourself accordingly.
- Introduce your funds to your company, and then you can reimburse yourself. The funds introduced are also fully reimbursable to you once the company has the funds to do this.
Other thoughts when using your private car for business journeys
VAT on mileage allowance
When we consider can you claim VAT on business mileage, if your company is VAT registered and you are operating under the standard/normal VAT scheme, your company can also reclaim some VAT within the HMRC mileage claims. When you are claiming VAT on mileage, HMRC has some set rates. In addition, when you reclaim VAT on mileage, you must obtain and retain your fuel receipts to make your VAT on mileage claims.
24-month rule
Expensing for your business journeys at the HMRC mileage rates is also subject to the 24-month rule. Therefore, if and when you know that you will be based at your contract site for longer than twenty-four months, you can no longer claim your business mileage to your contract site.
Taking a colleague or employee to work in your car
Additionally, if you take an employee to their work site in your vehicle, you can also claim extra mileage from your company as part of your HMRC mileage claim. Therefore, when you take a passenger with you, you can also expense an additional 5p per mile as part of your overall UK mileage claim.
Paying more than the FPCS rates
If your company pays more than the approved HMRC mileage rates, the excess will need reporting on form P11D. The employer will pay NI on this (at 14.53% in 2022/23 and 13.8% in 2023/24), while the employee will pay tax (at either 20%, 40% or 45%). Therefore, ensuring that your contractor mileage reimbursements stay within these allowed rates is essential.
Final thoughts
This guide details how you can expense mileage under the AMAPs system when you use your private car for contractor business journeys. It may be the case that you are on the road every day. As a result, you can make a car mileage claim. On the other hand, you may make the occasional business journey and, as part of doing this, can make a company mileage claim. However, when you do make business journeys you will save tax if you expense your mileage allowances as a contractor.
It’s good practice to keep records of your business mileage charges. Therefore, we advise you to keep track of your business mileage as well as any other contractor travel costs. If you do this, you can claim your UK mileage and associated travel expenses from your business. Furthermore, when you claim tax relief on mileage and other business travel costs this will help reduce your company’s overall tax bill. What’s more, you also end up with more money in your own pocket when you claim your travel expenses and mileage from your company.
We have another article that compares the use of your private vehicle to that of a company car. This takes a look at the tax implications between the two.
Link to Contractor Advice UK group on
