Self Employed Business Mileage

Andrew281

Hi all. I’m looking for a little advice, I have looked online but can’t seem to find a definite answer to my question.

I have recently became self employed after purchasing a small local window cleaning round. All work and admin etc will all be carried out by myself. I have most things in order now but I am a little stumped as to how business mileage works.

I’ll be using my own personal vehicle in the business and I will be using the HMRC approved mileage allowance rates. I expect I will be doing well under 10,000 miles per year so I’ll be able to claim back 45p per mile. What I am wondering though is how I do this? Correct me if I am wrong but I was planning on doing it the following way;

- pay for my fuel personally when filling up the car
- keep a detailed record of all business miles each month
- at the end of the month total up all business miles
- use the mileage form and invoice the business/myself for mileage x 0.45p ie (100x0.45 = £45)
- pay myself the £45 from by business account by transferring to my personal account

Would this be an acceptable way to do this and be compliant with HMRC? Or am I completely wrong lol.

The business account I currently have doesn’t come with a debit card facility so I would be unable to pay for fuel that way.

Thanks in advance

00ec25

wrong on the last point

you do NOT pay yourself £45

the £45 is a cost ("expense") for the business and is included in the calculation of your profits for tax purposes when you do your tax return
https://taxaid.org.uk/guides/information/a-starting-point-for-the-self-employed/self-employed/using-your-private-car-for-work

income - costs = taxable profits

NOTE the above assumes you are NOT operating as a limited company, if you are, it is different

Andrew281

Thank you for the advice.

How would I reimburse myself for paying for fuel throughout the month with my personal money?

Sorry I think I may have used the incorrect wording when I said “pay myself” implying I would be paying myself £45. What I meant was pay the mileage invoice that I produce to the business. Which in turn would come personally to myself.

Apologies if I am way of the mark here.

BeeJames

I had an additional related question. With calculating the mileage would you cost it 45p just to the job, or back to your home also. For example if i was working 10 miles away would this be £4.50 or £9.00. Thanks.

00ec25

Andrew281 wrote: »

Thank you for the advice.

How would I reimburse myself for paying for fuel throughout the month with my personal money?

Sorry I think I may have used the incorrect wording when I said “pay myself” implying I would be paying myself £45. What I meant was pay the mileage invoice that I produce to the business. Which in turn would come personally to myself.

Apologies if I am way of the mark here.

you really do not understand what "self employed" means do you....

a self employed sole trader is one entity, it is simultaneously a "business" and a "personal" entity. You do not invoice yourself, that is just madness.

you account for ALL money IN OR OUT of your bank account(s) as either business related or personal. Mileage is, as i said, a cost of your business. It is not a cash movement out of the business bank account into the personal bank account, it is simply a cost on your profit calculation for your tax return. There is no £45 to "reimburse" yourself since there is no distinction between "the business" and "the person"

if you cannot understand this concept, you are going to make a monumental mess of your tax return and really should pay an accountant to sort it out for you until you understand what you are doing.

San100

Hi Andrew 281
I have been Googling exactly the same question, and couldn't find confirmation - I just came across this forum.  I am sorry that you didn't get any constructive help, when you asked your question back in December.  The method you described in your post is exactly how I intended to process my mileage costs as well.  Obviously, when we are completing our self assessments, the mileage claims will be recorded as an Allowable Expense, and the salaries that we have paid ourselves will be a Disallowable Expense.  Both the mileage claims and the salaries will have been transferred from the business account to the personal account, throughout the year.  As you say, the actual fuel for the vehicle will have been purchased from the personal acount, and will remain so.  
As there was no helpful advice here, I have posed the question on another forum and had confirmation from an accountant that this method of recording/transacting is a perfectly sound way of doing things.  I realise your post was a good few weeks ago, so you may well have found the answere elsewhere already.

BeeJames - I charge the mileage both ways.  I have never confirmed with anyone that this is the correct way, but I had never doubted that it would be !

uknick

San100, the advice given originally was perfectly sound and correct.  If you are a sole trader/self employed (that is, trading without using a Ltd company) you can't "invoice/bill" yourself for mileage etc.  As you say all your income and allowable business expenditure is recorded in your self assessment and you are taxed on the surplus (or possible refunded on a loss).  In addition, what "salary" do you pay yourself?  Do you mean the cash drawings from the business account you make during the year for personal use?  I'm sorry to be pedantic, but if you say you are paying yourself a salary, this implies you must be running some sort of PAYE payroll with the associated administrative responsibilities.

Finally, the question of a sole trader claiming mileage costs to and from a place of work is not that clear cut.  If you go to the same place of work each day for a period of time then this could be considered your normal place of work and not therefore allowable for deductible mileage costs.  For example, I spent 6 month's contracting at one location for a client.  My travel costs were not deductible.  However, if you are a window cleaner as the OP is then, yes you could deduct to and from the work location as it would be considered his home was his normal place of work.

Tax is all about the detail, and in many cases, the correct treatment of an item is dependant on the particular circumstances.  Which is why tax professionals can earn so much by saving their clients even more in tax.