A Guide to Mileage and Car Expenses

Navigating the ins and outs of mileage claims can often feel like you're stuck in a never-ending roundabout, but fear not—our friendly guide is here to steer you in the right direction. Whether you're a sole trader, a partner in a partnership, or have a limited company car, understanding what you can claim as motor expenses is crucial. With different rules for each and methods for tracking your expenses, such as the 'simplified' or 'full-cost' methods, it's important to know which road to take. 

In this post, we'll break down the complexities and help you make an informed decision about how to record your mileage without any bumps along the way. Ready to hit the road to tax relief? Let's dive in!

Understanding Mileage Claims

Before we hit the gas on the details, let's get a handle on the basics of mileage claims. It's not just about counting miles; it's about understanding what counts and why.

Business vs. Personal Mileage

When it comes to mileage claims, the taxman draws a clear line between business and personal trips. But don't worry, it's not as complicated as trying to parallel park a lorry!

Business mileage includes journeys made for work purposes, like visiting clients or attending conferences. These are the golden miles that can potentially save you money on your tax bill.

Personal mileage, on the other hand, covers your everyday trips like popping to the shops or taking the kids to school. Sorry, but HMRC won't be chipping in for those!

Sole Traders and Partnerships

If you're flying solo or in a partnership, understanding how to claim motor expenses is crucial. It's time to put your business in the driver's seat! As a sole trader or partner, your business and personal finances are more intertwined than a plate of spaghetti. But don't let that scare you off from claiming motor expenses!

The key is to separate business use from personal use. Keep detailed records of your journeys, including the purpose, distance, and any associated costs.

Remember, you can claim for more than just fuel. Think insurance, repairs, and even a portion of your vehicle's depreciation. It's like finding extra change in the sofa cushions!

Pro tip: Consider using a separate bank account for business expenses. It'll make tracking as easy as cruise control.

Business Use of Own Car

Using your own car for business? You're not alone! Many sole traders and partners hit the road in their personal vehicles. Here's how to navigate this scenario:

1. 1. Choose your claiming method (we'll dive into these later)
2. 2. Keep meticulous records of business journeys, keep those receipts and logs handy.
3. 3. Calculate the business use percentage of your total mileage!

Pro tip: Be honest with your claims. HMRC might ask for evidence and its not worth the hassle of paying more unexpected tax in the long run! Now that we've covered the basics, let's shift gears and explore the two main methods for claiming mileage expenses. Buckle up!

The 'Simplified' Method (Mileage)

The 'simplified' method is like the express lane of mileage claims. It's straightforward, easy to use, and perfect for those who don't want to get bogged down in details.

How it works: You simply multiply your business miles by HMRC's approved mileage rates. Current rates that apply are 45p per mile for the first 10,000 miles, then 25p per mile after that. You can also claim an additional 5p per passenger.

Pros:

• Easy to calculate
• Covers all vehicle-related costs
• No need to keep detailed receipts

Cons:

• Might not reflect actual costs for high-value or fuel-efficient vehicles
• Can't claim additional expenses separately

Recording Using Dext Software

Let's face it, tracking expenses isn't the most thrilling part of running a business. But with the right tools, it can be as smooth as a well-oiled engine! Dext now makes recording mileage using the simplified method as easy as a Sunday drive. Here's how it works:

1. 1. Log into your Dext account
2. 2. Navigate to the 'Expenses' section
3. 3. Click 'Mileage' and 'Create New Mileage Claim'
4. 4. Enter the details of your journey
5. 5. Dext will then automatically calculates the claim amount

For those regular trips, you can set up recurring mileage claims. It's like setting cruise control for your expense tracking!

Remember, with the simplified method, you don't need to keep fuel receipts or track other car-related expenses. Use Dext's mobile app to log your mileage on the go. It's like having an accountant in your pocket!

The 'Full-Cost' Method (Fuel and Car Expenses)

The 'full-cost' method is for those who like to dive into the details. It's more complex but can potentially lead to higher claims for some drivers.

With this method, you calculate the actual costs of running your vehicle and claim the business proportion. This includes:

1. Fuel
2. Insurance
3. Repairs and servicing
4. Vehicle tax
5. MOT costs
6. Depreciation (via capital allowances)

You'll need to keep all receipts and calculate the percentage of business use. For example, if 60% of your mileage is for business, you can claim 60% of your total costs.

Pro tip: This method can be beneficial for expensive or fuel-hungry vehicles, but it requires more record-keeping. Weigh up the potential benefits against the extra admin work!

Full-Cost Method Details

If you've opted for the full-cost method, you'll need to be more detailed in your record-keeping. But don't worry, it's not as daunting as it sounds!

Here's what you need to track:

• 1. All vehicle-related expenses (fuel, insurance, repairs, etc.)
• 2. Total mileage (both business and personal)
• 3. Business mileage
  

Keep a logbook (physical or digital) recording:

1. 1. Date of each journey
2. 2. Start and end locations
3. 3. Mileometer readings
4. 4. Purpose of the trip
5. 5. Whether it's business or personal

At the end of the tax year, calculate your business use percentage and apply this to your total vehicle costs.

Remember, accuracy is key. HMRC may ask for evidence, so keep those receipts and logs safe. Think of it as creating a scrapbook of your business journeys!

We always recommend you consult an accountant for the best method for you and your business, they have expertise and knowledge of your circumstances.

Investing in efficient expense tracking is investing in your business's future. So why not take it for a test drive? Onboard with DL Accounts today and we will provide you with everything needed to get you started! Contact 01726 216110 or email support@dlaccounts.co.uk - Alternatively you can fill out our enquiry quote form with your details and we will send you a personalised quote based on your needs.