The use of mileage rates is an optional alternative to keeping detailed records of actual expenditure. For either method, journeys must be made wholly and exclusively for business purposes.
Self-employed taxpayers can compute their expenses using a fixed rate per business mile if they wish; there is no limit to this – all business may use the fixed rate deductions for motor expenses. The mileage rate basis must be applied consistently from year to year. It can be changed only when a vehicle is replaced.
The mileage rate covers the cost of running and maintaining the vehicle, such as fuel, oil, servicing, repairs, insurance, vehicle excise duty and MOT and also an element to allow for depreciation/capital allowance.
If the turnover increases and exceeds the VAT registration threshold, or if the threshold is reduced, then the taxpayer should continue to use the mileage rate basis until the vehicle is replaced.
The mileage rate covers the cost of running and maintaining the vehicle, such as fuel, oil, servicing, repairs, insurance, vehicle excise duty and MOT and also an element to allow for depreciation/capital allowance.
It does not cover costs that are specific to a particular journey, such as tolls, congestion charges and parking fees. These will be allowable for tax purposes where they are incurred solely for business purposes. The taxpayer may also claim the business proportion of the interest on any loan used to purchase the vehicle.
Landlords
Landlords are also able to claim the 45p (for the first 10,000 business-related miles and thereafter at a rate of 25p per mile.
The relevant mileage rates are as follows:
| Cars and vans: | |
| On the first 10,000 miles in the tax year | 45p per mile |
| On each additional mile above this | 25p per mile |
| Motorcycles | 24p per mile |
| Bicycles | 20p per mile |
Divyanshi is a subject matter expert in the UK accounting space, creating clear and easy-to-read content for accountants and businesses. She covers topics such as VAT returns, Self-assessment tax, bookkeeping, business planning and Year-end accounts. By understanding the common challenges faced by accountants and business owners, she focuses on writing content that answers real questions and simplifies complex topics. Her approach keeps information clear, relevant and useful for everyday business needs.
