Mileage allowance, what you can claim

As an e-commerce business owner, you may not realise that you are clocking up mileage that you should be claiming back. In addition to meal expenses and a Christmas party allowance, HMRC allow e-commerce businesses to claim back tax with a mileage allowance. Let’s look at what counts towards your mileage allowance and how to make your claim.

While mileage is unlikely to be a particularly regular or large expense in your e-commerce business it is worth knowing the specifics. Mileage expenses should always be treated accordingly for your financial wellbeing and your business taxes.

What is the mileage allowance?

Mileage is classed as any travel miles that are solely related to the course of your business but are not included in your daily commute. If you are travelling to meet a supplier or a customer or even to visit a factory or office that you do not visit in the course of your normal working day, then it is classed as mileage and you can potentially claim it back. You can also claim back a set allowance per passenger for carrying fellow employees in a car or van on a work journey.

What’s not included?

Mileage Allowance Payments only cover business trips and car journeys made for work outside of a regular routine. For this reason, your daily commute is not covered by the mileage allowance. Additionally, if you travel to the office once a week, that is within the scope of your normal business activities and is not allowable.

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If you are self-employed and prefer to cycle to work, then you will not be able to claim back any mileage costs. However, the bicycle itself may be an allowable expense along with any maintenance it requires. If you are a director, mileage on a bicycle is allowable.

How much is the mileage allowance?

Each tax year, HMRC releases the Approved Mileage Allowance Payments (AMAP) table, and it is best to adhere to these figures. For 2022/23 the figures are as follows:

VehicleFirst 10,000 business miles in the tax yearEach business mile over 10,000 in the tax year
Cars and Vans45p25p

You must factor in what is specifically a business cost, and what needs to be split between business and personal costs. If you attend a meeting and then go to the gym on the journey home the cost must be split accordingly.

Who can claim under the mileage allowance?

You can claim your mileage allowance whether you are self-employed or a director in a limited company. Any employees you hire can also claim back their expenses. If you underpay your employee’s mileage, they can claim it back at the end of the tax year through HMRC. To ensure you pay your employees the correct mileage allowance run your figures past your accountant and/or use HMRC’s worksheet.

You and your employees are allowed to claim an ‘approved amount’ of MAPs each year without reporting to HMRC. You can calculate the approved amount by multiplying your business travel miles for the year by the rate per mile of the vehicle driven.

Any additional miles above the approved amount will need to be reported on a P11D form and added to your or your employee’s pay and deducted and taxed as normal.

How much you can claim for mileage allowance
Taneli Lahtinen

How to claim your mileage when self-employed

There are two methods you can choose between if you are self-employed.

  1. Full cost method – Total your vehicle expenses for the year and the percentage of travel that was solely for business purposes. This will include mileage but also repairs, insurance, tax and any other expenses you incur.
  2. Standard mileage deduction – Calculate your expenses using the HMRC flat rates.

Both methods involve keeping a detailed log of your travel expenses. A simple way to keep track is to keep a small notebook and pen in your vehicle and simply note the odometer figures before and after each trip along with a note about the purpose of the journey. When calculating your mileage allowance, highlight any business expenses and total them. Alternatively, you can use an app to automatically log your mileage. We recommend MileIQ which integrates with Xero to completely remove this item from your to-do list.

How to claim your mileage in a Limited Company

If your e-commerce business is a limited company, you will need to use the Standard Mileage Deduction method listed above. Again, staying on top of this is essential to ensure you get back what is owed, and that your accounts accurately reflect the facts. Although it is not a legal requirement to pay mileage to your employees, many e-commerce business owners choose to do so and it is important to reimburse your employees the right amount.

VAT on the Mileage Allowance

If your e-commerce business is VAT registered, then you must account for VAT on the mileage allowance. As VAT is added to fuel prices, you can reclaim the VAT on the portion of fuel used for business mileage.

New Business Mileage Allowance

As an e-commerce business owner, you will likely incur travel expenses while your business is in its infancy. You may well need to travel to secure supply lines or set up staff, but your business’ bottom line may not be able to absorb the costs.

You should always claim your mileage allowance to accurately portray your business’ progress but there are a couple of options to postpone or ease the expense. You can delay your expense claim until the business has generated enough profit or you can pay in working capital before paying yourself the mileage claim. While the latter doesn’t leave your personal finances any better off, it does ensure the accounts are accurate in a timely fashion.

Next steps

If you need help accounting for your mileage costs or want to know more about VAT allowances for your e-commerce business, get in touch with our team. E-commerce is our speciality and we are happy to help your business reach its maximum potential.

The best time to act is now.



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