Did you know you can reduce your tax bill by knowing the most up to day HMRC mileage claim rates? Even if you have a company car, you can still save on taxes through the HMRC fuel rates.
You can use this guide to help you on your business travel finances.
What are the HMRC mileage rates and what should I know about them?
These mileage rates allow employees of a business to claim travel expenses when using a vehicle. This doesn’t just include fuel costs, it includes wear, road tax and insurance. Obviously it’s a little difficult to work out the general wear on someone’s car, even more so if you have to keep track of more than a couple employees. So HMRC uses a system which uses pence per mile instead of just fuel rates (known as Mileage Approved Payments (MAPs)).
As you don’t usually have to pay taxes on business expenses MAPs make it so you can make sure you’re paying the right amount of taxes. Even when you incur business vehicle expenses from a personal account, this mileage allowance also makes sure these expenses are exempt from tax.
Cars and Vans – UK Business mileage rates for 2022
The current mileage rate is the same as previous years, except there are different expense policy rates for cars and vans vs motorbikes and bicycles.
For cars/vans, the business mileage rate in 2022 is 45 pence per mile before you hit 10k miles. After 10k miles you can only claim 25 pence per mile.
Hybrid cards use the standard rate of 45p per mile, whereas electric car mileage rates are 4p per mile as electricity is not seen as fuel. This rate stays consistent for electric cars, even about 10k miles.
For example, if you’ve driven 12,000 miles for work in the last year you could claim:
10,000 x 45p = £4,500
2,000 x 25p = £500
£4,500 + £500 = £5,000 total tax free reimbursement
Motorcycle rates in 2022
For motorbikes, you can claim back 24p per mile when you use your bike for business travel. This remains the same no matter how many miles you travel.
For example, you drive 6,000 miles on your motorbike for business:
6,000 x 24p = £1,440 total tax free reimbursement
Bicycle rates this year
If you ride a push bike for work, perhaps delivering food or just to do local trips, you can have 20p per mile award for tax free reimbursement to cover insurance and general bike wear. This has no cap and can be claimed for an unlimited amount.
What trips count under the HMRC Mileage Allowance?
Examples of valid trips:
- Travelling between offices
- Travelling to a different location such as a conference or exhibition to conduct business
- When you can’t get a job done without travelling to this place, for example a colleague has broken down
- Driving to a client
- Driving to anywhere outside of your usual office space in order to do your job
Examples of invalid trips:
- Your daily commute to your fixed office
- Travelling less than 10 miles to another location for work (seen as too close)
- Toll payments
- A trip where you primarily do personal errands and not work errands
There are lots of others, so make sure to check out HMRCs website for the full list to make sure you are compliant.
How are mileage tax rates calculated?
As most companies reimburse employees monthly on their expenses, companies must keep track of total mileage over the tax year. At the end of the tax year you need to compare the actual amount paid to the number of miles driven. Once you’ve used a mileage calculator, the HMRC does not require any information or reporting as long as you do not go over the approved MAP amount.
How can I increase my mileage allowance?
If you drive a colleague to work, you can actually get a further mileage allowance. Mileage rates increase by 5p per mile when another employee travels with you in your car.
For example say you drive your college a total of 70 miles a month in carpooling (840 miles per year):
840 x 5p = £42
That’s £42 extra you can receive tax free.
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