Understanding business mileage
In recognition of the fact that many of us have to travel for business reasons, HMRC allows employees and sole traders to claim tax relief on their mileage. Employers are allowed to claim up to 45p per mile against their employee’s travel costs; generally this sum is reimbursed to the employee in their paycheck.
The 45p per mile standard rate for car drivers is well known. And though you may think of mileage as a tax bill reduction for car commuters only, you may not know that HMRC also makes allowances for bicycle and motorbike riders. So what are the rules and how can you use this business mileage allowance?
On your bike
Few of us would normally think of visiting a client’s site on our bike. But in recognition of the fact that some self-employed people do use their bicycle to reach other places of work, HMRC has extended the business mileage tax relief scheme.
Cyclists are able to claim 20p per mile for work-related travel, that is completed using their own bike, and which is not part of their normal daily commute from home. In order to claim their mileage expenses, cyclists will need to keep records of every business-related journey which can then be submitted to their employer, or used as part of their own self-employed tax return in January.
Easy riding – motorcycles
Similar tax relief is also available for motorcyclists. Again, they must be travelling to a client’s site, or to another temporary place of work, but qualifying journeys are reimbursed at a rate of 24p per mile.
Unlike business travel by car however, there are no ‘bands’ defining mileage claims for either motorcycles or bicycles. Car drivers are entitled to 45p for the first 10,000 miles they cover, before the rate drops to 25p for any additional mileage thereafter. In the unlikely event that you can bicycle 10,001 (or more) miles on work-related journeys, you can claim just 20p for every single one of them.
Keeping business mileage accurate
It is essential that you and your employees keep completely accurate records of mileage claims, or you risk a visit from a PAYE tax auditor. The Tax Man expects to see fully documented evidence of every trip, including the date and destination of the journey, and how many miles were driven/ridden to get there and back. For your own records, you might like to include a reason for why the journey was undertaken.
Keeping a log of mileage for a small business should be no more difficult than putting together a spreadsheet to capture these vital details. Alternatively, most accounting systems (including Xero) provide similar mileage capture and calculation functions to help you stay compliant easily.
Finally, you must ensure that business mileage claims are not being abused: you can only claim for travel undertaken for work purposes to destinations other than your usual place of work. Your employees also need to understand that if they submit fraudulent or exaggerated claims, they may be liable for additional PAYE contributions as a result. If you, or your team, have any uncertainties, talk to a specialist tax accountant before submitting your tax return.
