If you are a freelancer where travel is required as part of your job, you may be able to claim for travel expenses, and that includes any business mileage you clock up while using your personal vehicle. However, there are some differences in how self-employed and employees can claim this expense:
For any employee claiming business miles has always been pretty straightforward. Simply submit a mileage claim to your employer, and they will usually take care of it. In some cases where the employer cannot reimburse the total value of the mileage claim, the employee can claim the mileage allowance relief directly from HMRC to cover these expenses. However, when you control your business expenses, it can seem a little more complicated. This article will look at the different ways you, as a freelancer, can claim back your business mileage.
Am I entitled to claim for travel?
Yes, if you use your vehicle for business purposes, you can claim a business mileage allowance. It may not seem wholly worth it, but those little journeys can add up, and it can reduce your tax bill!
As a freelancer, you are classed as self-employed; therefore, you pay tax on your profit, not your overall income. There are two ways in which you can claim:
● The simplified method – This is a fixed rate mileage allowance.
● The actual cost method. This is where you add up all your motoring costs for the year.
The Simplified Method
HMRC will allow you to claim a set amount for each journey that you make for business purposes as a business expense or tax deduction.
The set amount is a milage allowance per mile. The current rate is 45p per mile for the first 10,000 miles and 25p for every mile after that. This allowance will cover both the cost of fuel as well as wear and tear on your vehicle, plus any MOT and servicing your vehicle needs. You can only claim for certain types of travel which HMRC define as:
● Journeys to and from a temporary place of work
● Traveling wholly for business purposes, for example, make deliveries, visit clients, or to meetings
An example of a temporary workplace could be at a client’s site, for meetings or project work. Although you can claim a mileage allowance for working at these temporary locations, there are a couple of rules you should be aware of:
● A workplace is considered temporary when you spend 40% or less of your working hours there.
● If you are working on a fixed-term contract, there is a 24-month rule in place where you can continue to claim travel expenses as long as you expect to work at that location for less than two years. After that, it becomes a permanent location.
● If you will be spending only two days out of five on a client’s site then the 40% rule will apply so you will actually be able to claim your travel for the duration of the contract.
If you have your own business premises, you cannot claim for travel to and from that fixed place of work because that is classed as your commute. In addition, If you make a journey that combines both business and personal mileage, you must separate out the business cost to claim for it.
When you claim via the simplified method, it’s worth noting that you cannot claim other motoring costs, such as fuel and insurance, servicing, and repairs. Also, you cannot use the simplified method if you had already claimed an entrepreneur’s relief or capital allowance when you purchased the vehicle.
Keeping a detailed record of each journey you make. This should include the date and purpose of the trip and not just the distance covered. Doing this will keep your records in order and is quite simple if you keep an ongoing diary that you complete after each journey.
If you’ve been covering business miles but haven’t yet applied for the associated tax refund, check out our mileage tax refund page for more information.
The actual cost method
If you choose this method, you’ll need to record all of your vehicle-related expenses as part of your bookkeeping. Including:
- MOT, servicing, and repairs
- Vehicle Tax
- Cost of breakdown cover
Once you’ve done this, you will need to calculate the number of business miles completed and determine what percentage can be claimed as a business cost. It’s essential to note the mileage at the beginning and end of each new tax year and the start of your accounting period when you choose this method. It’s also critical that if you use your vehicle for both business and personal journeys to keep track of your business mileage for the year as well as your total mileage to calculate the proportion of the costs that can be claimed as business use.
You can also claim capital allowances using this method. However, this will be restricted to the vehicle’s business use proportion of your vehicle usage. So, for example, if your car is used only 50% of the time for business, you can only claim 50% of the total allowance.
In most cases, the simplified method is the preferred choice for freelancers and small businesses.
How do I claim my business mileage tax allowance?
To claim back your business mileage allowance, you will need to include the details as part of your expenses when completing your Self Assessment and within the P11D form, which details all your business expenses. While you will not need to produce proof of your business miles covered at this stage, you should still keep a detailed log of all your vehicle costs and miles covered in case you need them as part of an HMRC investigation.
Travel expenses should be simple to log and track by uploading within your accounting software.
What is allowable for your specific business may vary when it comes to claiming business expenses. Always contact an accountant if you are unsure of the process or have any queries relating to business mileage claims.