Claiming business miles – a guide to business mileage allowance

Driving to deliver goods, meet clients or just commuting between work sites can quickly rack up costs, especially for larger fleets. Businesses can also be affected by frequent, short journeys too. But, there are ways to reduce travel your businesses expenditure.

HM Revenue & Customs (HMRC) grants a ‘business mileage allowance’ to each company vehicle that is in professional use. There are, however, rules that could affect your eligibility. The way your business is structured can also have an impact.

Business vs. personal use

It’s very important that you clearly distinguish what ‘professional use’ is.

Some employees and business owners only ever use company vehicles whilst working. Using a company vehicle in this way would most definitely fall into professional use quite comfortably.

For employees who take their company vehicle home with them for use in their own time, personal and professional mileage must be separated and reported as such. Journeys such as commuting to and from work will not qualify for tax relief as this is not classed as professional use.

Claiming mileage on personal vehicles

Cars and vans that are classed as ‘personal’ (i.e. owned by a member of your fleet staff) can claim back a mileage allowance of 45p for the initial 10,000 miles in a single tax year. Anything above this threshold can be reclaimed at 25p per mile. This policy is also designed to cover maintenance too.

Motorcycle owners can claim back 24p per mile and this remains the same regardless of how far they travel in the financial year.

It doesn’t matter if an employee uses more than one ‘personal’ vehicle in a single year, the tax is calculated using the combined mileage of all of their vehicles.

Distinctions for company vehicles

By contrast, a ‘company’ vehicle claims relief based on fuel expenditure. The amount you can claim varies depending on the type of fuel used, as well as the size of your engine:

Engine Size Petrol LPG
Up to 1400cc 10p 7p
1401cc – 2000cc 11p 8p
More than 2000cc 17p 12p

*Advisory Fuel Rates from December 2020

It’s also important to note that these numbers aren’t static. They’re dictated by AFR (Advisory Fuel Rates) from the Treasury. Global fuel trends cause them to fluctuate: it’s therefore worthwhile checking back every three months to see if the figures have changes.

Engine Size Diesel – amount per mile
1600cc or less 8p
1601cc – 2000cc 10p
Over 2000cc 12p

*Advisory Fuel Rates from December 2020 (Diesel)

As you can see from the second table, the rates change for diesel vehicles. Most notably, the biggest change can be found in the engine size, which stand at 1600cc or less, 1601 to 2000cc and over 2000cc respectively.

Claiming business mileage allowance

Man's hand refuelling car

As you claim for fuel expenditure under a company car’s mileage allowance, the AFR pricing table is a useful guide when you’re setting a fuel expense policy for your business. This will help give you the confidence that your policy is fair and cost-effective for everyone involved.

In some fleets, drivers will pay for their own fuel themselves and then claim the mileage allowance they are owed on their Class 1 National Insurance contributions, up to the thresholds we have outlined above, alternatively, a company can pay for the fuel while reclaiming the tax themselves.

Whatever the case may be, a robust payment record is essential.

The HMRC requires that you supply all receipts and records of all fuel expenditure. Fleets that have personal and company vehicles need to keep track and make sure that their records are HMRC compliant. Generally, there needs to be a set of dates, figures and total mileage to claim back everything you’re due.

While it’s ultimately your decision as to how employees use their fuel cards, setting out a clear policy and tracking their usage is important. MileageCount  records and reports every mile of every journey in any vehicle, to help reduce your mileage claims by up to 21% and save valuable admin time for your drivers.

At Fuel Card Services, we want you to enjoy the benefits of using fuel cards without the headache and cost of unnecessary taxation. A major benefit we offer is the provision of HMRC-approved invoices.

By combining all transactions for cardholders into one monthly invoice, your finance team can be saved the effort and time going through the many expense receipts from staff, whilst also saving users time and expense at the fuel pump.

If you’re interested in the many benefits of fuel cards, you can choose from our wide range of our products. We offer fuel cards from all of the biggest brands – Shell, Esso, BP, plus many more. As a result, we’re sure you’ll be able to find the one that’s perfect for you.

Hand lifting a fuel nozzle at petrol station

Understanding fuel expenses: How can you claim tax relief?

Understanding fuel expenses: How can you claim tax relief?

If you’re using a vehicle for work purposes, being able to claim tax relief for costs like fuel expenses is essential. But do you know how to do this, and what usage will be eligible for these benefits?

While larger fleets may have systems in place to track this, for smaller companies, this is an often-overlooked benefit. However, it’s one that could offer a vital saving at a time when budgets are tight.

These allowances let you offset the cost of fuel by claiming for every mile you drive. But how should you go about recording and filing for this, and what benefits can you expect to see?

What business expenses can I claim for?

Large and small businesses, sole traders, contractors and directors of limited companies can all take advantage of mileage allowances to reduce their burden when they pay tax.

HMRC allows you to make claims for every mile you drive, provided the journey is for work purposes. This allows you to cover some of the costs of running a company vehicle.

Helping reduce your fuel expenses is the most notable benefit of this, but the relief can also be helpful in managing other running costs. However, in order to keep things as simple as possible, mileage expenses are calculated as a single claim.

This means you can’t make separate claims for individual motoring expenses such as:

  • Fuel
  • Electricity
  • Road tax
  • MOTs
  • Repairs

Importantly, the vehicle used doesn’t have to be registered to the company. You can also claim for mileage incurred on a personal car or van, provided you only claim for your business trips.

What classes as business usage?

The key requirement for making mileage claims is that the trip must have been for a business purpose. But what does this mean in practice?

HMRC has specific guidance for what does – and does not – count as a business journey, so it’s vital you familiarise yourself with these rules.

To qualify as a business journey, you must be travelling between workplaces or between appointments. In general, the guidance says that if the trip is essential for work to be carried out, you can claim business mileage on it.

There are a few additional points to be aware of. Firstly, the business usage must be the primary purpose of the trip – so if you’re taking a personal journey with a stop along the way for a business reason, this does not count as business usage.

Also, a daily commute to a workplace, whether this is from home or any other location that’s not a permanent workplace, is not classed as business-related.

How do mileage allowance payments work?

Closeup of car dashboard showing dials and odometer.

Mileage allowance payments allow employees to be reimbursed by their employer for business trips taken in their personal vehicles. Businesses do not have to pay tax on these reimbursements.

This is based on a flat rate per mile. For the first 10,000 miles a car or van travels in a given tax year, this equates to 45p per mile. For each mile after that, the rate drops to 25p.

However, if an employee takes a passenger on a journey, these trips can claim an extra 5p per mile. This requires the passenger to also be an employee of the company and be travelling for business.

What are advisory fuel rates?

For business journeys made using company cars, employers can use HMRC’s advisory fuel rates when claiming business expenses. They are also used when workers have to repay the cost of any fuel used for personal travel.

These are calculated every quarter and are based on the engine size and fuel type of the car. For example, from 1st September 2020 the advisory fuel rate for petrol cars is 10p per mile for engines of up to 1,400cc, 12p for those between 1,401cc and 2,000cc, and 17p for engines over 2,000cc.

Let’s say, therefore, an employee buys petrol for a company car with a 1,400cc engine and records 300 miles of business usage. The employer would then reimburse them £30 (at 10p a mile) for these fuel expenses, which is a tax-free business expense.

On the other hand, if they are to fill up using a company account, and travel 100 miles for personal reasons, they would be required to repay their employer £10.

Businesses can set their own reimbursement rates to better reflect their own circumstances. For instance, if they use more fuel-efficient vehicles, they may set a lower figure per mile.

However, if they pay a rate higher than the approved mileage rates, and cannot show a vehicle is actually costing more to run per mile, the excess will be considered taxable profit by HMRC.

How can I make mileage tracking easier?

To claim business mileage, whether as a company or a sole trader, you’ll need a record of your business usage.

This requires a log of the dates when any business travel took place, the purpose of the journey, the starting and destination points, and the total miles covered. You’ll also need receipts for any fuel purchases.

Although HMRC won’t ask you to submit all this information every tax year, you are required to hold on to these records for five years in order to show them during any audit.

This can quickly become complex to manage if you’re still doing it by hand. Therefore, it pays to use specialist mileage tracking tools to make this easier. This software can automatically keep a full record of any journey taken and calculate claims.

As a result, employees can save huge amounts of time that would otherwise be spent on admin. Meanwhile, firms can be confident the claims they’re submitting to HMRC are accurate.

Get in touch with our experts to find out more about mileage tracking solutions and how they could save you time and money.

What is fleet management?

If your firm runs commercial vehicles of any kind, you need a fleet management solution. Whether you have hundreds of vans or just a couple of company cars, a clear plan for keeping these running smoothly is a must.

But what is fleet management? And what tools can you use to make this task as easy as possible? Read on to find out.

The basics of fleet management

Fleet management is an approach to looking after your company’s vehicles across every stage of their lifecycle. It starts with purchasing or leasing and covers maintenance, driver tracking and fuel management. At the end of a car or van’s life, it also ensures there’s a clear replacement and disposal plan.

This isn’t just for firms with large numbers of vehicles. It also applies even if you’re only running a small number of cars or vans, and if you’re using a ‘grey fleet’, where employees use their personal vehicles for work purposes.

The goal of this is to improve efficiency, cut fuel costs, keep your drivers safe and maintain compliance with the rules. This covers everything from monitoring driver behaviour and tracking routes to having up-to-date MOTs and insurance and meeting working time regulations.

Effective fleet management ensures there’s a single hub that covers all aspects of your vehicles’ operations. This is also where the fleet manager comes in.

The role of the fleet manager

The job of the fleet manager is to oversee the day-to-day operation of the firm’s cars, vans or trucks. They have a wide range of responsibilities and so need a good mix of skills, from accountancy to strong communications and the ability to multitask.

In general, a fleet manager’s roles will include the following:

  • Controlling costs. Ensuring operating costs are kept as low as possible is a primary task of the fleet manager. This can include getting a good deal on initial purchases or rentals, as well as keeping ongoing costs down. This can be done by improving fuel efficiency or managing the use of services like fuel cards.
  • Vehicle maintenance. Keeping your fleet on the road is vital to the success of any business. This means ensuring cars and vans are regularly serviced and checked for any faults.

    The latest smart technology
    can alert you to any potential issues before they become a problem, allowing you to plan your schedule and reduce the risk of a breakdown.
  • Ensuring driver safety. As well as ensuring your fleet is mechanically sound, a good fleet manager should also be keeping an eye on driver behaviour.

    Tools like telematics can keep a full log of their actions. It can show you if they were speeding, for instance, or if any harsh inputs have been made on the steering or brakes. This lets you step in with training or advice where necessary.

Driving a car with closeup of dashboard

  • Tracking vehicles. It’s essential that you know where your vehicles are at all times. GPS tracking tools give you a complete picture of your current situation and let you make changes.

    For instance, it can show you if drivers are taking inefficient routes between jobs and therefore help better plan your operations. What’s more, it can quickly alert you to any unauthorised vehicle use or track down a stolen car.

  • Ensuring compliance. It’s also up to the fleet management team to ensure their vehicles are road legal and that drivers are meeting their requirements. However, this doesn’t just include keeping MOTs and insurance valid.

    You should also be tracking any mileage claims for expenses and tax purposes and ensuring drivers aren’t breaching working time rules. This also covers ensuring your drivers are fully licensed for the vehicles they operate. And, you’re keeping a record of any issues such as penalty points.

How does fleet management work?

This can seem like a lot of plates to keep spinning, especially if you’re managing a large fleet. However, there are a range of tools and technologies that can make life easier.

Telematics systems are an important part of this, and are used by around 86% of fleets. What’s more, mileage tracking tools, servicing and maintenance schedulers and vehicle checking apps all have their role to play.

These all fall under the banner of fleet management software – something no professional can do without.

Understanding fleet management software

Digital data with logistics in background

Fleet management software solutions are vital for cutting through the data and giving you a clear picture of what’s going on in your business.

Having all the relevant information at your fingertips means you can make better decisions about all aspects of your operations. This applies both in the day-to-day management of your fleet and for longer-term strategy, such as which fuel card to go for or how often to replace vehicles.

Fleet management software typically covers several key areas, including:

  • Driver management – Records, expenses, driving behaviour etc.
  • Vehicle management – Inventory, maintenance and repair, licensing, disposal etc.
  • Operations management – GPS tracking, route planning, fuel usage reports etc.
  • Regulation management – Expenses, tax, working hours, emissions, etc.

The benefits of effective fleet management

It should be clear how good fleet management can improve every aspect of your operations. But what can this translate to in real terms? Here are some of the proven benefits of these tools.

  • Reduced fuel costs. Smart telematic solutions can reduce the MPG of your fleet by as much as 20%, while a fuel card can offer significant savings every time you fill up.
  • Improved safety. Companies that monitor driver behaviour can see a 42% reduction in the number of safety incidents, according to figures from Teletrac Navman.
  • Less downtime. A predictive maintenance schedule reduces the time your vehicles spend in the garage or broken down at the roadside. It can cost firms up to £800 a day for a van to be off the road, so this also saves you money.
  • Better insight. Fleet management tools let you know exactly what your drivers are doing whenever they’re on the road. This means you can plan your vehicle usage more carefully and ensure you’re meeting your duty of care to your drivers.

To learn more about fleet management, get in touch with our experts to see what tools and technologies can benefit your business.

Close up of a car speedometer and odometer

A guide to mileage tracking

Mileage tracking is a key part of any fleet management system. But it’s about much more than just keeping a log of how much distance your vehicles have covered.

An effective mileage management plan is essential for working out expenses, keeping track of drivers’ working hours and meeting your tax obligations. What’s more, it’s vital for reducing transport costs and keeping emissions in check.

However, traditional ways of doing this can be complex and time-consuming. So whether you’re a small firm in charge of a handful of company cars or managing a large fleet, modern tools will be hugely useful.

Here’s what you need to know about mileage tracking and how it can benefit your business.

What is mileage tracking?

Mileage tracking tools help you keep a complete, accurate record of your fleet’s activities. This will show how your vehicles are being used, which trips are eligible for tax deductions and more.

But simply making a note of the date and the odometer or the trip meter at the start and end of the journey is no longer enough. To be effective, you need to be recording:

  • Accurate mileage
  • Driving hours
  • Journey dates
  • Start and end destinations
  • Purpose of the trip
  • Fuel used

The evolution of mileage management

Close-up image of a man with receipts and a calculator

In the past, mileage management was a manual, tedious process. Expenses claims were reliant on pen and paper – or, more often than not, hastily-scribbled service station napkins – to log the miles driven. Each driver was responsible for entering their own details and calculating their own business miles.

The problems with this are obvious. The process is far too open to error or abuse, which means many companies end up overestimating their mileage.

For instance, one 2015 study found more than a third of drivers (36%) only updated their log once a fortnight or less. This would make it almost impossible to provide an accurate record of their activity.

What’s more, if HMRC decides to do a spot check and finds records don’t match up with fuel card invoices, the penalties can be high.

Fortunately, there are better solutions. Smartphone apps can provide a much simpler solution for logging driving times and mileage. Inbuilt GPS systems offer much greater accuracy and remove the need for any manual calculations.

However, they aren’t a silver bullet. Many apps still need the driver to remember to start and stop logging for each trip and enter further details.

This means they can be subject to errors. Some free versions also don’t include useful features like integration with accounting software.

This is where the latest generation of smart technologies comes in. Tools that can fully automate the process will be the future for many businesses, as they’re highly accurate and leave drivers with nothing to worry about.

How today’s mileage tracking tools work

Aerial view of cars on motorway with data overlay

Today’s solutions work in a number of ways. There will typically be several options that a firm can choose from to record mileage data and ensure it’s passed on to accountancy software.

For instance, one solution is to add a small device called a beacon to your vehicles. This runs in the background and automatically records journeys from start to finish, syncing with the user’s smartphone.

This means the driver never needs to press a button. It can even tell the difference between personal and business drives.

Alternatively, a GPS dongle can be used instead of a manual smartphone app. This will also capture the details of the vehicle automatically and accurately. All the driver has to do is plug it into a laptop or PC when they login to their online tracking software.

4 key benefits for your business

So what does this mean for your business? Getting this right will provide a number of benefits that allow you to save money and boost productivity. Here are a few of the key advantages of mileage tracking solutions.

1.  Reduced transport costs

First and foremost, these tools help you cut costs. A complete view of your company’s mileage allows you to identify any unnecessary journeys, avoid overestimations and improve future planning.

The effect of this can be huge. For instance, cutting the average mileage for a vehicle driving 12,000 miles a year by just 10% can lead to a £150 saving in fuel alone. Over a large fleet, this can quickly add up to a major bonus.

This is before you take into account the savings created by cutting out overestimations. Our research, for example, found the use of tracking tools reduces mileage claims by as much as 21%.

2.  Less time spent on admin

Automated tools also remove the need for time-consuming manual processes to record and upload mileage details.

Our research shows more than half of drivers (54%) spend more than two hours a month submitting mileage claims. One in ten even spend more than eight hours doing them – that’s over one working day a month just spent filling in forms!

Cutting out these requirements means your employees spend time on more productive activities. It’s great for managers as well. Expenses claims can be worked out automatically, so tax deductions or reimbursements are applied without manual input.

3.  Reduced emissions

A natural consequence of being able to reduce your mileage is that you’ll also cut your fleet’s emissions. This is an increasingly important consideration for many businesses, as managing your carbon footprint is a key part of any company’s social responsibility practice.

Encouraging the more efficient use of company vehicles – or dissuading workers from using their cars and making claims for personal trips – makes your fleet greener and cleaner.

4.  Improved accountability

HMRC has very strict requirements for the records you have to keep regarding your vehicle’s expenses. If you’re still collecting them manually and relying on spreadsheets, it’s easy for mistakes to be made or items to be missed.

This can be very costly. If you’ve been especially lax in your record-keeping, fines could date back for years. An automated mileage data capture solution therefore ensures HMRC compliance and gives you peace of mind.

A blue sign with white writing saying Reduce co2

How to reduce your fleet’s Carbon emissions

The world of fleet has never seen such a period of change. With uncertainties around tax rates, the WLTP and changes with the ULEZ becoming 24/7. Reducing your fleet’s CO2 emissions should be a big priority. More changes are set to come in future years, so fleets need to be prepared.

Reducing carbon emissions is in the hands of the fleet managers. While switching to EV might not be feasible for everyone, small changes within the existing system can make a huge difference without much capital investment, and no change is too marginal.

1. Review your vehicle habits

While it may seem obvious, innovation in your choice of vehicles should be the biggest change. Even now, many firms are in the habit of using petrol-guzzlers without paying attention to economic factors such as fuel consumption and CO2 emissions.

Match the vehicle to the job: There’s no need to send out a lorry or van to deliver goods that require the horsepower of a bike. It’s a good idea to invest in a smaller vehicle for smaller deliveries, if you feel this may be something your fleet is prone to.

There’s no need to compromise on performance: there are many vehicles offering less than 160g/km and fuel consumption above 45mpg. A fresh assessment on this can contribute to long-term financial savings, as well as reducing CO2 emissions.

2. Review your fleet policy

Where can you update your policy? Could you challenge the status quo? Many fleets operate under systems that have been in place for years. It’s crucial to keep up to date in one of the fastest changing industries in the UK.

You should also set new internal standards for vehicles and putting progressive CO2 targets in place, setting the company up for long-term savings in the instance of future law changes and tax requirements.

Investing in the best possible sat nav systems will also prevent your drivers from wasting valuable fuel if they take a wrong turn. Even if your navigation system has been in place for years, exploring updated versions can make a huge difference.

3. Don’t be weighed down

Eliminating just 45kg of excess weight can increase fuel efficiency by up to 2%. Consider downsizing or leaving unnecessary items such as roof racks and tool boxes back at the depot.

4. Under pressure

The importance of monitoring tyre pressure regularly is often overlooked as a factor affecting emissions, but a small change can make a big difference in this area. Too little pressure can lead to a higher rate of rolling  resistance, making the engine work harder and consume extra fuel as a result. You should encourage your drivers to undertake regular checks on their vehicle, to make sure things like this are in check.

If you want to start saving your diesel & petrol bills, then look no further than our own BP fuelcard, for more information, click here: https://www.fuelcardservices.com/brand-bp/