Business Mileage and Fuel Claims Explained by Bedford Accountants

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Claiming business mileage and fuel costs sounds simple on the surface. From experience I can say it is one of the most misunderstood areas of UK tax especially for small business owners freelancers and company directors in Bedford. I regularly see people underclaiming because they are unsure what is allowed or overclaiming without realising they are storing up problems for later.

In this guide I am going to explain business mileage and fuel claims clearly and practically. I will cover what counts as business travel who can claim how the rules work in real life and what HMRC actually expects to see if they ever ask questions. By the end you should feel confident about what you can claim what you cannot and how to do it properly without stress.

This article is written from the perspective of Bedford accountants working day to day with local sole traders limited companies landlords and growing businesses. While the rules apply across the UK I will keep the examples grounded in the sort of situations we see locally.

What business mileage and fuel claims actually are

At their core business mileage and fuel claims exist to recognise that using your own vehicle for work costs money. Fuel is the obvious cost but there is also wear and tear servicing insurance tyres and depreciation. HMRC allows you to claim a tax deduction for business travel so you are not taxed on profits that never really existed.

Business mileage refers to journeys made wholly and exclusively for business purposes. Fuel claims are closely linked but can apply slightly differently depending on whether you are self employed or running a limited company.

What matters most is not what you call the journey but why it was made. HMRC looks at purpose rather than convenience. If the journey exists because of the business it may qualify. If it exists because of where you live or personal choice it usually does not.

Who business mileage rules apply to

From my experience in Bedford these rules affect far more people than they expect. Business mileage is relevant if you are:

·         A sole trader or freelancer using your own car for work

·         A limited company director driving your personal vehicle

·         An employee claiming mileage expenses

·         A landlord visiting rental properties

·         A tradesperson travelling between jobs

·         A consultant visiting clients

·         A small business owner mixing work and personal driving

It does not matter whether you operate full time or part time. If you use a vehicle for business journeys the rules apply.

What does differ is how you claim and what rates apply depending on your business structure.

What counts as business mileage

This is where confusion usually starts. I often hear people say things like I drove all day so it must all be business or I started from home so it should count. Unfortunately it is not that simple.

Business mileage generally includes:

·         Travel from your normal place of work to a temporary work location

·         Travel between different work locations on the same day

·         Travel to visit clients customers suppliers or professional advisers

·         Travel to collect stock equipment or tools

·         Travel to training courses required for your work

For example if you are a Bedford based electrician driving from your workshop to a customer in Kempston and then on to another job in Sandy those journeys are business mileage.

If you are a consultant working from a home office in Bedford and you drive to a client meeting in Milton Keynes that journey is business mileage.

What does not count as business mileage

The most common mistake I see is people claiming for normal commuting. HMRC is very clear on this even if it feels unfair.

You cannot usually claim for:

·         Travel from home to your regular place of work

·         School runs even if you work afterwards

·         Personal errands mixed into business journeys

·         Travel that is mainly personal with business added on

For example if you live in Bedford and drive to a fixed office in Bedford town centre every day that is commuting even if you do work once you arrive.

If you stop at the builders merchant on the way home from the office that part of the journey may count but the main commute still does not.

Understanding this distinction early saves a lot of trouble later.

Working from home and business mileage

Many Bedford business owners now work from home either full time or part time. This changes the mileage picture but does not remove the rules.

If your home is genuinely your main place of business then travel from home to a temporary workplace may count as business mileage. The key word is genuinely.

HMRC looks at factors such as:

·         Where administrative work is done

·         Where records are kept

·         Where decisions are made

·         Whether there is another permanent base

From experience I always advise clients to be realistic and consistent. If you treat home as your base you need to be able to justify it if asked.

Mileage claims for sole traders and self employed individuals

If you are self employed you have two main options for claiming vehicle costs. You must choose one and stick with it for that vehicle.

Simplified mileage method

This is by far the most popular option in Bedford because it is simple and predictable.

You claim a flat rate per business mile driven:

45p per mile for the first 10,000 business miles in the tax year
25p per mile for any additional business miles

These rates are designed to cover fuel insurance servicing repairs and depreciation. You do not claim fuel separately under this method.

From experience this method works well for most sole traders especially those with modest mileage and average vehicles.

Actual cost method

This method involves claiming the business proportion of actual vehicle costs including:

·         Fuel

·         Insurance

·         Servicing and repairs

·         Road tax

·         MOT

·         Finance interest

·         Capital allowances

You must keep detailed records and apportion between business and personal use. For example if 60 percent of your mileage is business you can usually claim 60 percent of allowable costs.

This method can sometimes produce higher claims for high value vehicles or very high mileage but it comes with more admin and greater HMRC scrutiny.

Mileage claims for limited company directors

This is one of the areas where I see the most confusion locally.

If you are a director using your personal vehicle for company business the company can pay you mileage at HMRC approved rates. These are the same 45p and 25p rates mentioned earlier.

The payment is:

A deductible expense for the company
Tax free for you personally if within HMRC rates

This is usually the simplest and cleanest approach.

What you should not do is pay for fuel personally and then randomly reimburse yourself without records. That often leads to problems when accounts are prepared.

Company owned vehicles and fuel claims

If the vehicle is owned or leased by the company the rules change significantly.

The company can usually claim:

·         Fuel costs

·         Insurance

·         Servicing

·         Repairs

·         Lease costs subject to restrictions

However personal use introduces complexity. If there is private use there may be a benefit in kind which creates tax for you and National Insurance for the company.

Fuel benefit in particular can be expensive. In my experience many Bedford directors are better off paying for private fuel personally rather than triggering the fuel benefit charge.

Fuel receipts and record keeping

Regardless of structure good records are essential. HMRC does not expect perfection but it does expect evidence.

At a minimum you should keep:

·         A mileage log showing date start location destination purpose and miles

·         Fuel receipts where relevant

·         Details of the vehicle used

·         Evidence of business purpose such as invoices or appointments

I often recommend simple solutions. A notebook in the car a spreadsheet updated weekly or a mileage tracking app all work if used consistently.

What matters is that the records are contemporaneous and believable.

Real world example: sole trader in Bedford

Let me give you an example based on a typical client scenario.

A self employed plumber based in Bedford drives 8,000 business miles in the tax year using his own van. He chooses the simplified mileage method.

8,000 miles x 45p = £3,600 allowable expense

That £3,600 reduces his taxable profit. If he is a basic rate taxpayer that saves around £720 in tax and National Insurance. For higher rate taxpayers the saving is even greater.

Importantly he does not also claim fuel or repairs because those are built into the mileage rate.

Real world example: limited company director

A Bedford based consultant runs a limited company and uses her personal car for client visits. She drives 12,000 business miles in the year.

10,000 miles x 45p = £4,500
2,000 miles x 25p = £500
Total mileage claim = £5,000

The company pays her £5,000 which is deductible for corporation tax and tax free for her. At a corporation tax rate of 25 percent that saves the company £1,250.

This is often one of the most efficient ways for directors to extract value from their company without additional tax.

Travel between multiple roles or businesses

Another common Bedford scenario is someone running more than one business or combining employment with self employment.

Mileage can only be claimed against the business that incurred it. You cannot double dip.

If you drive from your employed role to your self employed work that may count for one but not the other depending on circumstances.

From experience this is an area where tailored advice really matters because small details change the outcome.

Landlords and mileage claims

Landlords often overlook mileage or assume they cannot claim. In many cases they can.

Travel to inspect properties meet agents deal with maintenance or manage lettings may count as business mileage.

However travel from home to a single long term let that you rarely visit may be harder to justify.

Again the purpose of the journey is key.

Common mistakes I see in Bedford

From years of reviewing records I see the same issues repeatedly:

·         Claiming commuting as business mileage

·         Not keeping mileage logs

·         Mixing fuel claims with mileage rates incorrectly

·         Claiming round figures with no evidence

·         Changing methods without understanding the rules

These mistakes are usually unintentional but they can lead to lost tax savings or unwanted HMRC attention.

HMRC enquiries and mileage claims

Mileage claims are a common enquiry trigger because they are easy to inflate and hard to verify.

If HMRC asks questions they will typically look for:

·         Consistency between mileage and business activity

·         Reasonable total mileage for the type of work

·         Clear explanation of business purpose

·         Supporting evidence

If your records are clear and sensible enquiries usually end quickly. If records are poor HMRC may disallow claims and apply penalties.

Choosing the right method for you

There is no single best option. The right approach depends on:

·         Your business structure

·         Your annual mileage

·         Your vehicle type

·         Your appetite for record keeping

From experience most sole traders and directors in Bedford are best served by the simplified mileage method. It is predictable tax efficient and low stress.

Those with expensive vehicles or very high mileage may benefit from deeper analysis.

Practical tips from Bedford accountants

Based on what I see in practice my advice is simple:

·         Decide your method early and stick to it

·         Log mileage as you go not months later

·         Keep claims reasonable and defensible

·         Review mileage annually as circumstances change

·         Ask for advice before changing vehicles or structures

Mileage claims should reduce stress not add to it.

The key takeaway

Business mileage and fuel claims are not about squeezing every possible penny. They are about claiming what you are legitimately entitled to while staying on the right side of the rules.

In my experience Bedford business owners who treat mileage sensibly save meaningful tax year after year without worry. Those who ignore it often lose money. Those who push it too far risk much more than they gain.

If you are unsure it is always better to ask early than to fix problems later. Getting mileage right is one of the small habits that quietly improves your business finances over time.

To continue reading you may find Avoid These Costly VAT Errors: Bedford Accountants Expose Common Pitfalls and How to Choose the Right Accountant for Your Business in Bedford helpful. You can also browse all related guidance in our Bedford Accounting Hub.