Business motor expenses: what can you claim?
Motor expenses are one of the most common areas of confusion for business owners.
You may use a car, van, motorcycle or bicycle for business journeys, but the way you claim the cost depends on your business structure, who owns the vehicle, how it is used, and whether there is any private use.
This guide explains the main points to consider.
Start with the type of business
The rules can differ depending on whether you are:
- A sole trader
- A partner in a partnership
- An employee
- A director of a limited company
- A company that owns or leases vehicles
The same journey may be treated differently depending on who owns the vehicle and how the cost is paid.
For example, a sole trader using their own car may claim vehicle costs through their Self Assessment records, while a limited company director using a personal car for company business may usually claim mileage from the company instead.
Business travel versus ordinary commuting
The first question is whether the journey is genuinely for business.
Business journeys may include travel to:
- Visit a client
- Attend a temporary workplace
- Visit a supplier
- Go to a business meeting
- Travel between business sites
- Attend a training course for work
- Deliver goods or provide services away from your normal workplace
However, ordinary commuting is not normally allowable.
This usually means travel between home and a regular workplace is not a business journey for tax purposes.
The distinction matters. A journey can feel work related, but still be treated as ordinary commuting if it is simply travel to your normal place of work.
Using your own vehicle for business
If you use your own car, van, motorcycle or bicycle for business journeys, you may be able to claim a mileage allowance.
For employees and directors using their own vehicles, HMRC approved mileage rates are commonly used.
The current approved mileage rates are:
- Cars and vans: 45p per mile for the first 10,000 business miles in the tax year
- Cars and vans: 25p per mile for business miles over 10,000
- Motorcycles: 24p per mile
- Bicycles: 20p per mile
You can check the current rates on the GOV.UK travel mileage and fuel rates page.
These rates are designed to cover the running costs of the vehicle, including fuel, servicing, insurance, repairs and wear and tear.
What records should you keep for mileage claims?
Mileage claims should be supported by proper records.
A good mileage log should include:
- Date of the journey
- Start point
- Destination
- Reason for the journey
- Number of business miles
- Vehicle used
It is not enough to estimate a round figure at the end of the year.
If HMRC ever asks questions, clear mileage records are much easier to support.
Can a limited company reimburse mileage?
Yes. If a director or employee uses their own vehicle for company business, the company can usually reimburse business mileage using HMRC approved mileage rates.
The company can normally claim the mileage reimbursement as a business expense.
If the company pays more than the approved mileage rate, the excess may create a tax or National Insurance issue for the employee or director.
If the company pays less than the approved rate, the employee or director may be able to claim tax relief on the shortfall.
Can a sole trader use mileage rates?
Sole traders may be able to use simplified expenses for business mileage.
The flat rates are:
- Cars and goods vehicles: 45p per mile for the first 10,000 business miles
- Cars and goods vehicles: 25p per mile after 10,000 business miles
- Motorcycles: 24p per mile
GOV.UK explains the rules on the simplified expenses for vehicles page.
However, you cannot normally switch freely between mileage rates and actual costs for the same vehicle. If you have already claimed capital allowances or actual vehicle costs for a vehicle, simplified mileage may not be available for that vehicle.
Actual cost method for sole traders
Instead of using simplified mileage rates, a sole trader may claim the actual business proportion of vehicle costs.
This can include:
- Fuel
- Insurance
- Repairs
- Servicing
- MOT
- Road tax
- Breakdown cover
- Parking for business journeys
- Lease costs, subject to restrictions
- Capital allowances, where available
Where the vehicle is used partly for business and partly privately, only the business proportion is allowable.
For example, if 60% of the mileage is business use and 40% is private use, broadly 60% of the allowable running costs may be claimed.
Good mileage records are needed to support the business percentage.
Company owned cars
If a limited company owns or leases a car and makes it available to a director or employee for private use, this can create a company car benefit.
Company car tax can be significant.
The benefit is usually based on factors such as:
- The car’s list price
- CO2 emissions
- Fuel type
- Availability for private use
- Whether the company also provides fuel for private use
The company may also have Class 1A National Insurance obligations.
For this reason, company cars should be reviewed carefully before the company buys or leases one.
Electric cars can sometimes be more tax efficient than petrol or diesel cars, but the figures should still be checked before making a decision.
Company owned vans
Vans are treated differently from cars.
A company van may create a taxable benefit if it is available for private use, but the rules and benefit amounts are different from company cars.
If private use is limited to insignificant private use or ordinary commuting under the relevant van rules, the tax position may be different.
The classification of the vehicle matters. Some vehicles that look like vans or pickups may not be treated as vans for tax purposes.
It is worth checking before buying or leasing a vehicle through the company.
Fuel paid by the company
Fuel is another area where problems often arise.
If the company pays for all fuel, including private fuel, there may be a taxable fuel benefit for the director or employee.
This can be expensive and may not be worthwhile unless private mileage is high.
A cleaner approach is often:
- The individual pays for all fuel personally and claims business mileage, or
- The company pays only for business fuel, supported by records, or
- Private fuel is fully reimbursed to the company where required
The right approach depends on whether the vehicle is personally owned or company owned.
VAT on fuel and mileage
VAT treatment depends on the arrangement.
Where a business reimburses mileage for business journeys in an employee’s own vehicle, it may be possible to reclaim VAT on the fuel element of the mileage claim, provided the business has valid VAT records and fuel receipts.
The whole mileage rate is not treated as fuel. Only the fuel element can potentially support VAT recovery.
Where a VAT registered business pays for fuel used in a company vehicle and there is private use, VAT may need to be restricted or a road fuel scale charge may apply.
HMRC publishes road fuel scale charges for private fuel use. You can check the current guidance on the GOV.UK VAT road fuel scale charges page.
VAT on vehicle costs is an area where careful records are important.
Parking, tolls and congestion charges
Business parking, tolls and congestion charges may be allowable where they relate to a qualifying business journey.
However, penalties and fines are different.
Parking fines, speeding fines and other penalties are usually not allowable business expenses, even if they arose during a business journey.
It is important to separate:
- Business parking costs
- Tolls and congestion charges
- Penalties and fines
They should not all be treated in the same way.
Insurance and business use
If you use a personal vehicle for business journeys, you should check that your insurance covers business use.
Commuting cover may not be enough if you visit clients, suppliers or other work locations.
This is not just a tax point. It is also a practical risk issue.
Home to work travel
Travel from home to a normal workplace is usually ordinary commuting and is not normally allowable.
This can be a trap for directors and employees who work partly from home.
If your home is your administrative base, some journeys may still need careful review. The tax treatment depends on the facts, including whether the destination is a permanent workplace, temporary workplace or part of an itinerant working pattern.
It is better to check the position than assume all journeys from home are business journeys.
Mixed journeys
Sometimes a journey has both business and private elements.
For example:
- Visiting a client and then going shopping
- Travelling to a meeting while also visiting family
- Extending a business trip for a private weekend
- Taking a longer route for personal reasons
The business element may still be allowable if it can be clearly identified, but private costs should not be claimed.
Good records help show what was business and what was private.
Common mistakes
Common motor expense mistakes include:
- Claiming commuting as business travel
- Claiming all vehicle costs without adjusting for private use
- Using company cards for personal fuel without recording it properly
- Reclaiming VAT on the whole mileage rate rather than the fuel element
- Ignoring company car or van benefit rules
- Treating parking fines as allowable business costs
- Not keeping mileage records
- Switching between mileage and actual cost methods incorrectly
- Assuming a company owned car is automatically tax efficient
These mistakes can lead to incorrect tax returns, VAT errors and unexpected benefit in kind charges.
Practical checklist
Before claiming motor expenses, ask:
- Who owns the vehicle?
- Is the vehicle used by a sole trader, employee, director or company?
- Is the journey genuinely business travel?
- Is any part of the journey ordinary commuting?
- Is there private use?
- Are mileage records being kept?
- Are fuel receipts available where VAT is being reclaimed?
- Is the vehicle a car or a van for tax purposes?
- Is there a benefit in kind issue?
- Is the business using mileage rates or actual costs consistently?
How CooperFaure can help
CooperFaure can help business owners, sole traders and limited company directors understand the correct treatment of motor expenses.
We can support with:
- Reviewing mileage claims
- Advising on business and private use
- Checking whether mileage or actual costs are more suitable
- Reviewing company car and van implications
- Advising on VAT treatment
- Setting up bookkeeping categories
- Helping directors avoid benefit in kind surprises
- Preparing Self Assessment and company tax returns
If you are unsure how to claim vehicle costs, or whether a company vehicle is the right option, we can help you review the position before the costs are included in your accounts or tax return.