Motor Expenses and Mobile Phones

Motor expenses

As en employee your employer can pay 45p per mile for the first 10,000 business miles per year.  For mileage in excess of 10,000 the current reclaim rate is 25p.

If your employer refunds your mileage at a lower rate you are entitled to claim the difference as a deduction from your taxable income when you complete your income tax return.

If you are self-employed you should calculate your motor expenses as a proportion of your total motoring expenses.

For example: your total car costs including insurance, tax and servicing are £1,000.  50% of your mileage is business mileage and the balance is private use.  The tax deductible expense will be £500 (being 50% of £1,000) plus the cost of fuel for each mile.

As a concession HMRC will accept a rate of 45p per business mile up to 10,000 miles per annum and 25p thereafter if you claim on this basis in your self-employment tax return AND you were not registered for VAT when you started claiming.

Mobile phones

As an employee you can receive one mobile phone or smartphone from your employer and as long as it is made available for work then you will have no benefit-in-kind charge due; even for private calls and useage.

The situation is more tricky for the self-employed as the basic rule for expenses is that they should be wholly and exclusively for the businesses (see letter E).  A business mobile used purely for your business will be a deductible expense.  If the phone is on a fixed fee contract you will need to estimate how much use is private and how much is business and only deduct a proportion of the cost.