Mileage allowance

Can directors claim for fuel and motor expenses?

We cannot include car repair, fuel and running costs in a limited company’s accounts unless they are for a company car.

Directors can claim for 45p per mile for the first 10,000 business miles per year and 25p thereafter.

We would normally make an adjustment for this via the director’s loan account and then the director can be re-imbursed or withdraw funds from the company when it suits them.

Why can’t we include fuel and motor expenses for personal cars?

If a car is owned personally by a director, then they are personally responsible for paying the general running costs for the car, such as:

  • petrol or diesel fuel
  • car insurance
  • MOT and servicing
  • general repairs

A director may think that if they are using their car for business use, for example for travelling to meetings with clients and temporarily working at a client site (ie less than 2 years), then they should be able to claim a proportion of the running costs in their company’s accounts.

However, unlike use of home, we cannot apportion a percentage of the director’s personal car running costs for business use.

Calculating mileage allowance

The Government has set specific rates of mileage allowances and these are supposed to cover the cost of fuel and also the general running costs.

At the current time the rates are:

First 10,000 milesAbove 10,000 miles
Cars and vans45p25p

You can find the latest rates here

For example, if a director drives 15,000 business miles per year, the mileage allowance would be:

10,000*45p + 5,000*25p = £5,750

Estimating mileage allowance

It is best to keep a detailed log of business journeys, for example, using a mileage calculator app or a spreadsheet.

However, it is also possible to estimate the business mileage.

1) Use something like Google Maps to calculate the distance to each client and then estimate the number of journeys. For example: Distance*2 (for return journey) * number of journeys per week * 52 (or eg 48 after holidays etc) = estimated number of business miles

2) If the above is very tricky, some clients also use a general round number percentage based on their perception of how much they use the car for business, for example 80% business use.

It is also important to remember that HMRC could potentially disallow the tax deduction if they do not agree with the basis or estimate.

By Mohammed Haque

Mohammed is a chartered accountant (ICAEW) with many years of experience in dealing with complex audit, accounting and tax matters.