Claiming VAT on Mileage: The Ultimate Guide for 2025

Claiming VAT on Mileage: The Ultimate Guide for 2025

Tax reclaims for mileage can be a bit of a challenge however, knowing the rules and regulations can greatly benefit employees as well as employers. This complete guide offers up-to-date information about claiming VAT on mileage costs throughout the UK.

Eligibility for VAT on Mileage

If your business is registered for VAT it is possible to claim back VAT on the expenses for mileage incurred by employees who use their own automobiles for business-related trips. This is applicable to expenses for fuel as well as mileage. Employees are entitled to mileage reimbursement when using personal vehicles for business purposes.

Mileage Rates:

• First 10,000 miles: 45p per mile
• After 10,000 miles: 25p per mile
• An additional 5p/mile for each business trip passenger

These rates cover fuel and wear and wear and. Electric vehicles can claim the entire amount is available and the VAT receipt for fuel is required in order to back the claim.

Employer’s Role:

Employers are able to claim VAT back on employee mileage costs in the event that a mileage allowance has been given. The amount of allowance to be paid must be equal to the fuel component of the claim. It must be calculated based on The Advisory Fuel Rates published by HMRC.

Calculation of VAT on Mileage

To calculate the VAT on mileage:

1. Find the fuel percentage: Refer to HMRC’s Advisory Fuel Rates that are based on the type of vehicle and size of the engine.
2. calculate VAT Divide the portion of fuel by one sixth in order to determine the amount of VAT. Rydoo

Example:

A petrol car with an average fuel cost of 15p/mile:

• Fuel portion: 15p
• VAT Redeemable: 15p x 1/6 = 2.5p per mile

NOTE: Ensure to retain receipts for fuel as proof of the VAT refund.

Eligible Mileage Expenses

The expenses that can be claimed as tax reclaims comprise:

• Cost of purchases for fuel VAT is claimed on the fuel portion of mileage costs.
• Rates of mileage: You can claim VAT on the basis of rates of the Advisory Fuel Rates for your vehicle’s type and engine size.

The Advisory Rates for Fuel (Effective the 1st of March, 2025):

NOTE: Hybrid cars are classified as diesel or petrol vehicles to determine the advisory rates for fuel. DNS Associates+4GOV.UK+4Rydoo+4

Record-Keeping Requirements

To be sure you’re eligible for VAT refund:

• Keep detailed logs: Record dates, distance, destinations, and the purpose of business-related travel.
• Maintain receipts for fuel: Keep all fuel receipts for business travel to help with VAT claims.
• Sort fuel types: Note the fuel type that is used on each business trip since the amount that can be reclaimed varies according to the fuel type and mileage.

Claiming VAT for Business Mileage

In claiming VAT for business mileage:

• Keep proper documentation in place: Ensure accurate records of travel arrangements as well as fuel transactions.
• calculate VAT Calculate the tax that is reclaimed based on the part of the mileage that is fuel-related costs.
• Submit VAT claim: Include the VAT claim for the fuel portion in the mileage calculation when you file tax returns with VAT.

VAT Reclaim Process for Employers

Employers may claim VAT back on mileage expenses:

1. Giving the allowance of mileage: Ensure employees receive the amount of mileage they are entitled to in accordance with the fuel component of the trip.
2. Record keeping: Make detailed notes of your business travel and receipts for fuel.
3. Tax Reclaim: Send the VAT claim for the fuel portion of mileage costs when filing VAT returns.

VAT Reclaim for Self-Employed Individuals

Self-employed people can claim VAT on mileage costs by:

1. Keep records Make sure you keep accurate record of your business trips and receipts for fuel.
2. The calculation of VAT Find out the amount of VAT to be reclaimed based on the fuel component of the costs.
3. Returning VAT Send the VAT refund for the fuel component of mileage costs when filing VAT returns.

Notice: Ensure your business is VAT registered and not operating under the flat-rate scheme that allows you to claim VAT on mileage costs.

Overseas Business Mileage and VAT

When doing business abroad:

• REclaiming VAT The eligibility to claim VAT back on mileage travelled overseas is contingent on the particular conditions and the taxes of the country that are involved.
• Information: Maintain detailed records of mileage and fuel receipts. allowances for business travel in foreign countries.
• The VAT impact: Understand the specific regulations and conditions to claim VAT on mileage, based on the type of transport employed during business trips abroad.

Electric Cars and VAT Reclaim

Electric vehicles rac.co.uk

• Tax Reclaim: It is possible to claim the total amount you can claim for business travel, which includes the tax on electricity that was utilized for these journeys.
• Allowance for mileage: It is 45p in the initial 10,000 miles, and 25p per mile on the following miles.
• documentation: Proper documentation and VAT receipts for electricity used are required in order to justify the reclaim.