mileage allowances

Self-employed people with a turnover under the VAT registration threshold (whether they’re registered or not) are allowed to claim HMRC Approved Mileage Rates instead of actual running costs. 40p/mile for the first 10,000 miles then 25p/mile.

It works best for owner-drivers with rented small vans doing very high mileages. 2500 miles per week equals about £650 allowance for £85 rental, £20 insurance & £250 fuel.

If you use the scheme you can’t claim any other expenses for ANY vehicle costs except for hire-purchase interest. Can’t claim fuel or vehicle insurance but you can still claim congestion charge, tolls, GIT etc.

You have to keep a full, accurate log of your journeys and mileages and be able to prove that you covered all the mileage on business. Records have to be kept for 6 years after the end of the tax year and the Revenue can and do check records randomly.

The allowance is charged to your P&L account as if it was a normal expense and can do a nice job of decimating your profits for both Income Tax and Tax Credit purposes. 

Posted under Courier Financial Issues, Mileage Allowance Scheme

Posted by Alec at 5:51 pm, January 9, 2007

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