How do I categorise fuel expenses for work?

If you use your own vehicle, you typically claim mileage using HMRC's Approved Mileage Allowance Payments (AMAPs), which cover fuel. If it's a company vehicle, you can claim the actual fuel costs, but you must account for any private use, either by applying a fuel scale charge for VAT purposes or by only claiming the business proportion.

How should travel expenses be added to an invoice?

Travel expenses are typically claimed internally by employees or directors from the business, not usually added directly to a client invoice unless they are specifically re-charged to the client as part of a project. If re-charged, they should be itemised clearly and supported by receipts.

What are the tax implications for purchasing an electric company car?

Electric company cars are highly tax-efficient. For 2026/27, they attract a low Benefit-in-Kind (BIK) rate of 4% for the employee and qualify for 100% First Year Allowance for the company, meaning the full purchase cost can be deducted from profits in the first year.

Can I claim for a van purchased in a previous year?

Yes, if you purchased a van in a previous year, you would have claimed capital allowances for it at that time. Vans generally qualify for Annual Investment Allowance (AIA), allowing 100% of the cost to be deducted from profits up to the annual limit in the year of purchase. If the AIA limit was exceeded, Writing Down Allowances would apply in subsequent years.

What records do I need to keep for mileage claims?

You need to keep a detailed mileage log for all business journeys. This should include the date of the journey, the start and end locations, the purpose of the trip, and the total business miles travelled. You do not need fuel receipts if you are claiming using the approved mileage rates.

Can I claim for food and drink when travelling for business?

Yes, you can claim for reasonable costs of meals and drinks (subsistence) when you are on a business trip and away from your normal place of work. This applies to overnight stays and day trips where the journey is genuinely for business.

Vehicle and travel expenses: what UK businesses can actually claim

Understanding allowable travel expenses

For any expense to be claimed by your business, it must be incurred "wholly and exclusively" for business purposes. This is a fundamental principle from HMRC. Normal commuting between your home and your regular workplace is generally not considered an allowable business expense.

Allowable travel expenses typically include:

Public transport costs: Train, bus, air, or taxi fares for business trips.
Accommodation: Hotel or bed & breakfast costs for business-related overnight stays.
Subsistence: Reasonable costs for meals and drinks when you are on a business trip and away from your usual workplace.
Vehicle-related costs: This covers mileage, fuel, parking fees, tolls, and congestion charges.

The 'temporary workplace' rule

A key distinction for travel expenses is whether a workplace is temporary or permanent. If you (or an employee) work at a location for less than 40% of your working time, or for less than 24 months, it may be considered a temporary workplace. In such cases, travel expenses to and from this location can be claimed. If both conditions are met (more than 40% of time and expected to last over 24 months), it usually becomes a permanent workplace, and travel costs are no longer allowable.

Claiming mileage for personal vehicles

If you, as a sole trader, director, or employee, use your own car or van for business journeys, you can claim Approved Mileage Allowance Payments (AMAPs). These rates are designed to cover the costs of fuel, wear and tear, insurance, and servicing.

For the 2026/27 tax year, the approved mileage rates are:

Cars and vans: 55p per mile for the first 10,000 business miles.
Cars and vans: 25p per mile for business miles above 10,000.
Motorcycles: 24p per mile.
Bicycles: 20p per mile.
Passenger allowance: An additional 5p per mile for carrying a fellow employee on the same business journey.

These rates apply from 6 April 2026 and are backdated to the start of the current tax year. You do not need fuel receipts to claim mileage using these standard allowances, but you must keep a detailed mileage log.

Company cars and vans

When your business owns or leases a vehicle, the rules for claiming expenses and the tax implications for the individual using it are different.

Company cars

If your limited company provides a car that is used for personal journeys, this is considered a 'Benefit-in-Kind' (BIK), and the individual will pay tax on it. The BIK value is calculated based on the car's P11D value (list price including VAT and optional extras), its CO2 emissions, and its electric-only range for hybrid vehicles.

For the 2026/27 tax year:

Fully electric cars (0g/km CO2): The BIK rate is 4% of the P11D value. This rate is set to increase by 1% annually until 2028.
Ultra-low emission cars (1-50 g/km CO2): BIK rates vary from 4% to 16% depending on the electric-only driving range. For example, a car with an electric range of 130 miles or more has a 4% BIK rate.
Higher emission cars: Rates can go up to 37%.

If your company provides fuel for private use in a company car, there is an additional 'fuel benefit charge'. For 2026/27, the car fuel benefit multiplier is £29,200 (figures for illustration — check current rates).

Company vans

For vans provided by your company that are used for private journeys, a flat-rate van benefit charge applies. For 2026/27, this charge is £4,170 (figures for illustration — check current rates). If the company also provides fuel for private use in a non-electric van, there's a van fuel benefit charge of £798 (figures for illustration — check current rates).

Electric vans are exempt from both the van benefit charge and the van fuel benefit charge, making them a tax-efficient option.

Capital allowances for vehicle purchases

When your business buys a vehicle, you may be able to claim capital allowances to reduce your taxable profits.

Cars: Cars generally do not qualify for the Annual Investment Allowance (AIA). However, new zero-emission (0g/km CO2) cars can qualify for a 100% First Year Allowance (FYA), meaning you can deduct the full cost from your profits in the year of purchase. This allowance is extended until 31 March 2027. For other cars, Writing Down Allowances (WDAs) apply:
Cars with CO2 emissions of 50g/km or less: 14% WDA per year (main rate, reduced from 18% from April 2026).
Cars with CO2 emissions over 50g/km: 6% WDA per year (special rate).
Vans: Vans are generally treated as plant and machinery and can qualify for the Annual Investment Allowance (AIA), allowing 100% of the cost to be deducted from profits up to the current £1,000,000 limit.

Reclaiming VAT on fuel

If your business is VAT-registered, you can reclaim VAT on fuel used for business purposes. The rules differ depending on whether the vehicle is used solely for business or for both business and personal journeys.

Business-only use: You can reclaim all the VAT on fuel purchases.
Mixed business and personal use (company cars):

Fuel Scale Charge method: Reclaim all the VAT on fuel, then apply a 'fuel scale charge' to account for the private use. This is a fixed amount set by HMRC based on the vehicle's CO2 emissions.
Business mileage only: Reclaim VAT only on the proportion of fuel used for business. This requires detailed mileage records to show the split between business and personal journeys.

Employees using their own cars: If you reimburse employees for business mileage in their own cars, you can reclaim VAT on the fuel element of those payments. You must keep fuel receipts and use HMRC's Advisory Fuel Rates (AFRs), which are fuel-only rates, not the full AMAPs.

Common mistakes

Claiming commuting costs: Travel between home and your regular workplace is personal, not business, travel.
Poor record-keeping: Without detailed mileage logs (date, destination, purpose, mileage) and receipts for other expenses, HMRC may disallow claims.
Mixing personal and business fuel without accounting for VAT: If a company car is used for private fuel, you must either apply a fuel scale charge or only reclaim VAT on business mileage.
Incorrectly classifying vehicles: HMRC has specific definitions for cars and vans, which impacts capital allowances and BIK. For example, some 'crew cab' pickups might be treated as cars, not vans.
Not understanding BIK implications: Providing a company car or private fuel for employees can lead to significant tax liabilities for the employee if not managed correctly.

Frequently asked questions

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