Do you use your personal car, van or other vehicles for work-related travel? While you might think your commute forms part of your tax-deductible business mileage, this isn’t usually the case.
Here’s an in-depth look at HMRC’s rules on commuting and other tax-deductible mileage expenses.
HMRC defines a commute as the journey you make most days between your home and your permanent workplace. HMRC calls this “ordinary commuting.”
A commute can also be the journey between your permanent workplace and another place that is unrelated to work. For example, if you go to the gym after work, HMRC would count the journey between your office and the gym as a commute.
Sadly, no. HMRC doesn’t consider commuting to be a business journey. This means that, as a rule, you cannot deduct the mileage from your taxes when you drive from home to your usual workplace. Or when you drive between your workplace and another place that is unrelated to work.
Yes. There is one exception. Your “commute” is tax deductible if:
If you’re self-employed and you work from home, you technically don’t have a commute. This means you can usually deduct the mileage when you travel from home for work-related purposes.
However, do be careful.
HMRC have recently started cracking down on self-employed people who claim they work from home but regularly work from somewhere else. This means you have to make sure there is enough evidence to show that your primary and permanent workplace is indeed your home.
Typically, HMRC takes a case-by-case approach to this. However, you’ll usually have to show them that you perform “substantive duties” from home on a regular basis. In other words, you must show that, most of the time, you carry out the core parts of your business activities from your home office.
Let’s say you’re a self-employed writer.
You do the bulk of your writing in your home office. You also reply to emails, do your bookkeeping and carry out other administrative tasks from home.
Sometimes, you use your personal car to drive to client meetings.
In this case, you clearly carry out substantive duties at your home office, because you do most of your writing from there. This means you can deduct the drives between your home office and client meetings from your taxes.
Let’s say you’re a barrister.
You spend your mornings in court, arguing cases. And in the afternoon, you’re in chambers doing research and writing up legal briefs. You also have a home office, where you do your bookkeeping and answer emails.
In this case, you don’t carry out substantive duties at your home office. What you do is mainly administrative. As a result, you cannot deduct business mileage when you drive between your home office and court.
If you’re an employee who works from home, you may, in some circumstances, deduct drives to your company’s premises. However, you’ll need to show HMRC that:
If you’re an employee, HMRC usually considers your home to be a workplace for tax purposes if you satisfy all of the following conditions:
Let’s say you’re an accountant.
You work for a small company that has limited office space. Your employer specifically hired you on the basis that you’ll work from home because there’s no room for you at their premises.
Here, your home would qualify as a workplace. Which means you can deduct business travel from home to your company’s premises.
All clear? Great.
Now, let’s have a look at the type of mileage you can deduct and how to calculate it.
You can deduct mileage from your taxes if it relates to drives you made ‘wholly and exclusively’ for business purposes. HMRC considers this to mean one of the following:
To calculate your tax-deductible business mileage costs:
Let’s say you use your personal car for work. During the 2017 / 18 tax year, you drove 9,000 business miles.
Your employer has reimbursed you at a rate of 10p per mile.
Since your employer has already reimbursed you at a rate of 10p per mile, you can only claim 45p less 10p, so 35p per mile.
To find your tax-deductible business mileage costs, you’d multiply 9,000 miles by 35p, which would give you £3,150.
In addition to mileage, you can also deduct the following travel expenses. But only as long as you’ve incurred them “wholly and exclusively” for business purposes:
As a rule, you can’t. Everyone has to eat and drink to live. So, HMRC doesn’t consider them to be expenses you’ve incurred “wholly and exclusively” for business.
That said, HMRC does accept that you may have to incur extra costs if you’re away on business. So, you may be able to deduct the cost of food and drink if you stay somewhere overnight for business purposes, for example, because you’re attending a conference far from home.
But forget the lobster and the champagne. You’ll still have to prove that the costs were “reasonable.”