Motor Expenses And Mileage.
If you are a sole trader or in a business partnership and use your car or van for your work, then there are two different methods you can use to claim mileage costs as an expense. Once you have chosen a method to use, you will have to continue using that method until you change your vehicle. It is best in your first year of trading to get your bookkeeper and accountant to look at both methods so you can see which is best for your business.
Both methods require you to keep mileage records with the date of travel, purpose of journey, destination and mileage covered. There are a number of mileage apps available for Android and iPhone to help you record your mileage. For example, TripLog is a GPS Mileage Tracker app which gets good reviews. Remember to back up any data in case your phone gets damaged or is lost. The traditional method is to use a written mileage log which you can keep in your car or van. You can download a free Mileage Log from the bottom of this article.
Actual Cost Method.
You need to keep records, receipts and invoices of all your motoring costs which include insurance, servicing, MOT, breakdown membership, repairs, car parking charges, fuel costs and road tax. You cannot include any speeding or parking fines incurred.
At the end of the tax year, your bookkeeper or accountant pulls all these costs together and works out the percentage of mileage that is wholly and exclusively for business from your mileage records. This percentage is then applied to all the costs incurred and is used to calculate what can be claimed as an expense.
Authorised Mileage Rates.
The second method is to use HMRC’s authorised mileage rates. The rates you can claim depend on the type of vehicle used, the total business mileage and if you have a passenger. These rates are then applied to the mileage that is wholly and exclusively for business.
Remember these methods of claiming vehicle costs are only relevant for sole traders and business partnerships, if you operate through a limited company the rules may be very different for you.