Update – UK Business Mileage Rates for 2019-2020

The HMRC AMAP rates for 2019-20 are in.  The rates apply for any business journeys you make between 6 April 2019 and 5 April 2020. They’re identical to the rates that applied during 2018-19. In fact, the last time AMAP rates changed was in April 2012, when the AMAP rate for the first 10,000 car and van miles rose from 40p per mile to 45p per mile.

If the drive is for business purposes, you can claim tax back from HMRC. With this in mind, here’s a definitive look at the UK’s business mileage-allowance rates for 2019-2020. We’ll also show you how to calculate your mileage deduction.

Did you know, you can also claim an extra 5p per mile if you have a passenger with you on a business drive. Just set up a custom purpose in MileCatcher for such rides.

Who can claim tax back on business mileage using the AMAP rates?

You can claim a business mileage allowance using AMAP rates if you:

  • Are employed or self-employed (this holds true whether you’re a sole trader, a partner in a partnership or do business as a limited liability company). If your employer pays your business mileage costs but the amount is lower than the AMAP rate, you can claim tax back on the difference
  • Use your personal car for business-related travel (company cars have different rules, which we’ll deal with in a minute)
  • Haven’t claimed any capital allowances on your vehicle
  • Claim your business mileage deduction using AMAP rates every year. You can switch to a different method only if you get a new car.

A journey counts as business travel if:

  • You have to go somewhere other than your usual workplace to do your job, for example, because you’re meeting a client at their office
  • Driving is part of your day-to-day duties, for example, because you’re providing delivery service.

The following DO NOT count as business journeys:

  • Commuting
  • Travelling to a location that’s close to your workplace. So, if a client’s office is next door to yours, driving from home to the client’s office wouldn’t count as a business journey
  • Trips in which your main purpose isn’t work-related
  • And no, you can’t turn a personal trip into a business journey by stopping to run a work-related errand on the way.

With that out of the way, let’s take a more in-depth look at AMAP rates.

 

What do the AMAP rates cover?

AMAP rates cover the cost of running and maintaining your vehicle. This includes:

  • Fuel, servicing and maintenance (including your MOT) and any repairs
  • Car insurance
  • Road tax (vehicle excise duty, or VED)
  • Wear and tear.

AMAP rates DON’T cover:

  • Motorway tolls
  • Parking fees
  • Congestion charges
  • Other incidental expenses.

You can claim tax back on these expenses in addition to the AMAP rate if you can show you’ve made them ‘wholly and exclusively’ for business purposes. This means:

  • You incurred the expense purely for business reasons. This would apply if you had to pay for parking when visiting a client’s office
  • What if there is some personal use, but you can show you used a ‘definite proportion’ of the expense ‘wholly and exclusively’ for business purposes? You can claim the portion of time parked that was for business purposes. Find our more details and examples here.

How to calculate your business mileage deduction: Example 1

To calculate your business mileage deduction, you’ll need to keep a log of all your journeys (MileCatcher mileage tracker makes keepign a log super simple).

Once you have this information in hand, calculating your business mileage deduction is very straightforward.

Let’s say you’re self-employed. Your total taxable profit (your income after deducting allowable expenses) is £40,000.

You’ve travelled 14,000 miles by car. 3,000 were personal journeys and the remaining 11,000 were business-related.

So, you’d calculate your mileage deduction as follows:

  • Multiply the first 10,000 by the current AMAP rate of 45p. This gives you £4,500
  • Multiply the remaining 1,000 by the current AMAP rate of 25p. This gives you £250
  • Add £4,500 and £250 to get the total of £4,750
  • Deduct £4,750 from your total taxable profit. This means you’ll pay tax only on £35,250

How to calculate your business mileage deduction: Example 2

Now, let’s say you’re an employee. You’ve racked up 10,000 in business mileage on your personal car. Your boss reimburses you at a rate of 35p per mile.

In this case, you can claim tax back on the difference, which is 10p per mile.

This means you can deduct £1,000 from your taxes (10,000 multiplied by 10p).

How do I claim my mileage deduction?

Claiming your mileage deduction is easy. If you’re self-employed, include the mileage deduction in your self assessment tax return. If you’re employed, you can claim using Form P87. Do note, however, that you’ll have to file a self assessment tax return if you’re claiming more than £2,500.

What if I drive a company car?

HMRC’s business mileage rates don’t apply to company cars. A company car is a vehicle that:

  • Belongs to your employer (or, if you’re self-employed, to your limited liability company)
  • You take home with you
  • You use for both business and personal journeys.

HMRC considers a company car to be a benefit-in-kind. This means you can’t claim a mileage deduction on your tax return. Instead, you actually pay tax on the car.

Frederick W. Daily, J.D, LL. M (tax)

Frederick W. Daily, J.D, LL. M (tax)

Fred Daily is a tax attorney with over four decades of experience in the tax field. He has given tax programs for CPAs, Enrolled Agents and even the IRS. Fred has been quoted in the New York Times, Wall Street Journal, and has appeared on CBS, NBC, Fox, NPR news features and ABC’s Good Morning America. He is an author of books on taxes and his website, taxattorneydaily.com features a wealth of tax tips for minimizing taxes and dealing with IRS issues.