Getting It Out – Mileage Payments

Business use of personal car – mileage payments

Income Type

Non-taxable payment

Company Impact

  • Fully tax deductible against corporation tax
  • No P11D reporting requirements

Individual Impact

  • No personal tax
  • No national insurance
  • Nothing to put on the tax return

How much?

  • Work out how many business miles you have done (it doesn’t matter what car it is in as long as it isn’t a car belonging to your company)
  • If you’ve done less than 10,000 miles in the tax year, pay yourself 40p per mile.
  • Otherwise pay yourself 25p per mile.

How it works

Mileage is by far the most profitable way of getting cash out of a company. The rates (40p per mile up to 10,000 miles and 25p after that) are fixed regardless of what car you have and how you run it. If you do a lot of leg, then LPG conversion or hybrid vehicles can seriously boost your bank balance.

Mileage is only payable on business miles. Business miles include travel to and from a ‘temporary’ workplace, which is roughly a place you travel to less than 40% of your time, or where you will be for less than two years.

You need to keep records of the date, the mileage incurred (start and end mileometer readings are best) and the business reason for the travel.

Mileage is very difficult for HMRC to challenge because it is a statutory provision. If they bother at all they will try and break the mileage log, but as long as this is accurate and the reason for the travel undeniably business related then there is little they can do.

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