Business Travel and Mileage for Sole Traders.

How to account for business mileage and travel.

As a sole trader, it can be confusing what business mileage is, what you can claim and how you record it

Business Mileage

If you use your personal vehicle for business journeys, you can include the cost of the mileage incurred in your accounts, therefore saving you tax.

What is business mileage?

Business mileage relates to any mileage incurred whilst carrying out your business. It should be wholly and exclusively for the business. So, if you go shopping with friends, but pop into the bank whilst there, that mileage isn’t solely for the business and isn’t allowable.

Business mileage includes trips to the post office or courier drop-off, collecting stock, attending meetings and networking events, visiting business exhibitions etc. If you are making that journey purely for business reasons, then it’s very likely it’s business mileage.

However, there are a few rules as to what is and isn’t business mileage:

• Mileage from home to a permanent place of business, say a shop or an office, is not business mileage. This is commuting and therefore not a business expense.

• Mileage from your shop or office to other locations (perhaps to buy stock, attend a meeting or provide a quote) is business mileage and can be included in your accounts.

• If you work from home, this is more than likely to be your permanent place of work. In this circumstance, your mileage to a temporary place of work, a meeting etc is business mileage and can be included in your accounts.

What can I claim?

Cars & Vans

• 45p per mile for the first 10,000 miles per tax year.

• 25p per mile over 10,000 per tax year.

Motorbikes

• 25p per mile for the first 10,000 miles per tax year.

• 24p per mile over 10,000 per tax year.

Sadly, HMRC does not allow Sole Traders to claim mileage for business carried out on a bicycle, which frankly, isn’t the greenest decision. However, if you use your bike for work a lot, you may be able to include some of the cost of your bike and replacement items such as tyres in your accounts. Speak to us to find out more.

How do I claim?

You must keep a record of all your business mileage to claim it.

You can now record mileage in Quickbooks, or you could use a mileage app such as MileIQ.

Alternatively, a simple spreadsheet or notebook will do the trick. For each journey, you need to record the date, number of miles, from and to locations and the purpose of your journey, ie to visit Joe Bloggs Limited or to drop off parcels to the courier.

You must also keep fuel receipts as evidence that you have purchased fuel. You don’t claim the actual value of these receipts, they simply prove that you have purchased fuel.

By including the mileage figure in your accounts, you are reducing your profit and therefore reducing the tax you have to pay.

Other travel such as bus and rail fares

As long as the travel is wholly and exclusively for the business (see above), costs incurred for bus, rail, taxi and air fares are allowable. Again, regular commuting costs aren’t allowable.

Parking, tolls and congestion charges are all allowable, but if you pick up parking or speeding fines whilst on business, sadly, it isn’t an allowable expense.

Just don’t forget to keep all the receipts for everything you purchase.