How to Expense Mileage Through Your Limited Company

Save tax and claim back the money you're entitled to by expensing all business mileage through your company

Written by 
James Morgenstern
Updated on
May 28, 2024

Introduction

Travel is an essential part of running a business. Whether it's meeting with clients, attending conferences or picking up supplies, business travel is a frequent occurrence for many business owners, freelancers and contractors. 

If you use a vehicle for business travel it’s extremely important to claim all allowable mileage through your company as it’s incredibly tax efficient, and can save you a small fortune versus paying for it personally.

But, how do you correctly expense this travel through your limited company? Let's dive into the specifics for cars, vans, motorcycles, and bicycles.

1. What counts as a business journey?

The type of vehicle you use doesn't change the basic principle: not all journeys are considered business-related.

What doesn’t count:

Your daily commute to your regular office or co-working space isn’t considered a business journey. This is a universal principle, irrespective of the mode of transport. Commuting is a personal decision and thus not deemed a business expense.

What does count:

If you travel to a temporary place of work, such as attending a client meeting, procuring supplies, or heading to a conference, you can expense it through the business. 

The definition of a temporary workplace is an establishment you're expect to work at for under 24 months. 

2. How much can you claim for business mileage?

The claim amount varies based on the mode of transport:

Claimable Mileage Rates

Vehicle Type First 10,000 Miles After 10,000 Miles
Car/Van 45p 25p
Motorcycles 24p 24p
Bicycles 20p 20p

These rates are designed to cover all associated costs, such as fuel, wear and tear, insurance, and maintenance. 

For example: If you've driven 1000 miles in your car for business purposes, you can claim back £450. Meanwhile, if you've cycled 100 miles to client meetings, you can claim back £20.

Note: All of the costs should all be paid for from your personal account, not from the business account. The purpose of the per mileage rate is to cover your personal expenses, whilst separating business from personal travel. 

3. Understanding the Tax Savings on Travel Expenses

Travel expenses can be deducted from your taxable profit, thereby reducing the amount of corporation tax your company owes.

To illustrate: If you drive 1,000 miles and claim £450 for car mileage, this can lead to savings of up to £110 in corporation tax. Scaling this up, if you drive 10,000 miles, you can claim £4,500. This translates to a potential corporation tax saving of up-to £1,110.

When these travel expenses are correctly claimed, the company can reimburse you (whether you're the director or an employee) entirely tax-free.

Furthermore, this system ensures that you aren't dipping into your personal finances to cover the company's travel costs. This could result in personal tax savings of up to 45% so it’s critical you claim back for every qualifying journey you make, no matter how small. 

4. How do you claim mileage?

So how do you actually claim the mileage back, keep track of everything and pay yourself? 

Regardless of your mode of transport, to claim back mileage expenses, it's crucial to maintain a comprehensive record of your journey. 

How to claim in Mighty: 

Platforms like Mighty make this a breeze. 

  • Go to Mileage Claims under the expenses menu
  • Click ‘Add an expense’.
  • Input the date, start and end points, and the purpose of your journey.
  • Select ‘Car’, ‘Motorcycle’, or ‘Bicycle’ as appropriate.

Mighty manages the calculations, applies the tax savings, and confirms the amount you can pay yourself tax-free. 

When claimed correctly, the business mileage is tax deductible for the company and you won't have to pay tax or national insurance on the amount you reimburse yourself for business travel.

How to claim manually‍

Alternatively, you can use a spreadsheet to detail every trip, then pass this information to your accountant who will typically tell you how much you can pay yourself back once they’ve done your accounts. 

5. Remember Other Related Expenses

While on a business-related journey, there might be additional costs like parking, tolls, food, or even accommodation. As long as you're on a business-related journey to a temporary location, these costs can typically be expensed through the company. 

Unlike the running costs of your vehicle, you can pay for these directly from the business account. If you do mistakenly pay for business expenses through your personal card, you should still claim this back through the business by adding a personal expense. 

Conclusion

For freelancers, contractors, and limited company owners, the road is often an extension of the workplace. Whether you're in the saddle, or behind the steering wheel, understanding the tax benefits of your journeys is essential.

Mighty makes tracking and expensing business mileage efficient and straightforward, ensuring compliance and maximising benefits. Take control of your travel expenses with the intuitive tools and expert team at Mighty.

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