This is of course only when the passenger is also travelling for business purposes.
It is also worth noting that additional expense of up to 5p per mile can be claimed when travelling with more than one person in the car. This can be used across more than one vehicle and should be calculated together as one allowance.Īs a working example, if 12,000 miles were travelled each year in a car, the mileage allowance would be £5,000, worked out as: To calculate the Approved Mileage Allowance Payments (AMAPs) over a given period, it is simply a case of multiplying the total number of business miles by the rate per mile for the vehicle. The current rates* per business mile as outlined by HMRC are as follows: Whilst there’s always exceptions, in most cases, once the tax and NI is taken into account over a longer period, especially if personal journeys are undertaken, using your own car and claiming mileage usually works out to be not only the simpler but also the most financially appealing option. The company will also be liable to pay Class 1A National Insurance (NI) on the cost of providing a car, just as it would if you had been paid the extra salary and purchased a car with that directly. In addition, many may not consider that if any personal journeys are made, this will be seen as a taxable benefit and the savings you might have made on initial corporation tax when purchasing the vehicle are suddenly diminished. Many contractors make the mistake of looking at the tax savings across the first year which, when buying a company car, will always be greater due to the tax relief associated with the initial capital allowance on the purchase. However when looked at over a number of years and when fuel, road tax, insurance and maintenance are taken into account, this isn’t always the case. From the outset, a company car might look like the best option. Limited Company contractors do have the ability to purchase a company car should they wish. With this in mind, here’s our own look at claiming mileage as a contractor, outlining everything which we believe you might need to know.Ĭompany car vs mileage allowance payments On top of that, questions often arise as to how much can be claimed, up to what threshold and on what journeys.
Many contractors may wonder whether they would be better off purchasing a company car (when trading as a Limited Company) or whether claiming the standard mileage allowance is in fact the most attractive option. However, one of the most common areas of confusion is that of mileage. Claiming mileage as an independent contractorĪs a contractor, you’ll undoubtedly already be claiming expenses against your tax bill.
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