Self-Employed Travel Expenses

Mini_P

I've been self-employed since 2004. Since then i've been completing my own tax returns and stayed organised using spreadsheets and receipts.

Regarding my travel expenses, I used the same vehicle for personal and business use and kept of track of how many miles I used for each purpose.

I then took my total petrol/vehicle maintainence receipts and split it down pro-rata for personal and business.

Example: Total receipts = £1000.00; Personal Miles: 500; Business Miles: 750
Allowable expenses for self-assessment: 750/1250 x 1000 = £600

This is the figure I've been putting on the self-assessment for vehicle costs/travel expenses.


So, I find out tonight that I could actually claim 40p per mile for the first 10,000 miles and then 25p per mile for the rest. Is this right?

If this is the case, this would cut my yearly profit by around £2000 and in turn cut my tax bill by £400.

What i'm afraid of however is if I use this 40p/25p rate, is it more likely that HMRC will ask to see my records?

Rolo_Tomasi

Provided your turnover is not above the VAT registration limit then you can claim the 40ppm instead of your expenses however as you have been using the receipts method so far you have to continue doing it this way until you change your vehicle.

You should note that if you use the mileage method, you cannot also claim capital allowances on the cost of your vehicle as this is included within the rate.

This aspect alone would have probably covered any accountants charges.

Mini_P

My turnover is nowhere near the VAT limit so i'm cool with that.
I won't be changing my vehicle for a while now. Can I start using it from my next tax year?
I don't use an accountant.

Possetjohn

Both methods have their pluses and minuses. The pence per mile method is simpler, but you need to be doing close to the 10,000 business miles per year to get the best out of it, as all the costs of running a typical vehicle are distributed across that 10,000 miles. If you do less then you don't get the full element of fixed costs like depreciation, road tax, MoT test and insurance etc. although it depends on the vehicle.
I'm guessing from the amount you think you can save you are doing at least 6-7000 business miles.
Don't forget the other things that you can include in the receipts/expenses methods besides Fuel & Maintainence
Capital Allowances (as mentioned by Jimmo & Rolo Tomasi)
Insurance, Road Tax, MoT test, Breakdown Service etc.
Interest on any loan used to buy the vehicle
Of course all these need to be split for Private and Business miles.

As the others say, normally you have to choose a method and run with it for as long as you use that vehicle for the business

Mini_P

I claim insurance, road tax and the vehicle loan using the same method as I claim travel expenses as I pay for my vehicle using finance. (I never realised I could claim breakdown cover too)
I don't intending claiming for error or mistake relief as i've claimed my expenses on receipts and not in excess of them.
I do well over 10000 business miles a year, in fact this year business year (my business year conveniently runs the same as the tax year) i've done just under 11,000 miles.
I've looked at the website above. I actually ride a motorbike so my mileage rate is 24p per mile.
I've had this vehicle for a year so just missed out on the 24p per mile. Thanks for the help