Relevant motoring expenditure and nic – are you due a refund
Many business owners and self-employed professionals overlook one of the most straightforward ways to reduce their tax bill: claiming relief on legitimate motoring expenditure. Whether you’re driving to client meetings, site visits, or between multiple work locations, HMRC allows you to claim these costs against your business profits. Better still, if you’ve been underclaiming for previous years, you may be due a refund. Let’s explore how this works and whether you’re missing out.
Understanding Allowable Motoring Expenditure
HMRC is quite generous when it comes to what counts as legitimate business motoring. You can claim:
- Fuel costs (petrol, diesel, LPG, or electric charging)
- Vehicle maintenance and repairs
- MOT fees
- Vehicle insurance premiums
- Road tax (vehicle excise duty)
- Parking fees and tolls incurred during business travel
- Breakdown cover (AA, RAC, etc.)
- Tyres and batteries
Importantly, you cannot claim any element of motoring costs that relates to private travel or commuting to a permanent place of work. HMRC’s distinction here is critical: a journey from home to your office every day is commuting and isn’t allowable. However, if you work from home and travel to meet clients or attend different sites, those miles are generally claimable.
The Mileage Allowance Relief Route
Rather than tracking every receipt for fuel, maintenance and tax, many self-employed people opt for the simplified mileage approach. This uses HMRC’s approved mileage rates, currently:
- First 10,000 miles per tax year: 45p per mile
- Miles over 10,000: 25p per mile
These rates apply whether you drive a Ford Fiesta or a Range Rover—the allowance is the same. You simply record the business miles you’ve driven and multiply by the appropriate rate. This method is popular because it’s straightforward and you don’t need to retain every petrol receipt or service invoice.
However, the simplified approach may not suit everyone. If your vehicle has significant running costs—say, a top-spec company car with expensive servicing—you might recover more by claiming actual expenses instead. This requires meticulous record-keeping and receipts, but can be worthwhile.
National Insurance Considerations
Here’s where many people miss a valuable saving: claiming motoring expenditure doesn’t just reduce your income tax bill; it can also reduce your National Insurance liability.
For the 2024/25 tax year, if you’re self-employed and your profits fall below £12,570, you won’t pay income tax. However, you’ll still owe Class 2 National Insurance contributions (£163.80 per year). By reducing your profit through motoring expense claims, you’re directly lowering your Class 4 National Insurance as well, which is calculated at 9% on profits between £12,570 and £50,270.
Let’s say you claim an additional £2,000 in motoring costs you’d previously missed. That £2,000 reduction in profit saves you:
- Income tax at your marginal rate (20% for basic rate taxpayers = £400)
- Class 4 National Insurance at 9% = £180
- Total saving: £580
Over several years of underclaiming, these savings accumulate quickly.
Should You Review Previous Years?
If you suspect you’ve been underclaiming motoring expenditure, it’s worth reviewing your records. HMRC allows you to amend previous Self Assessment returns within one year of the filing deadline (or four years if you’ve discovered a genuine error through no fault of your own).
For the 2023/24 tax year, the deadline to amend your return was 5 April 2025. For 2024/25, you’ll have until 5 April 2026. If you file late or discover errors later, contact HMRC to discuss whether they’ll consider an adjustment claim.
Gathering supporting evidence is essential—mileage logs, fuel receipts, or maintenance invoices. If you’ve kept reasonable records, even rough contemporaneous notes can be sufficient. If records are missing but you can reasonably estimate business mileage, many accountants will help you make a defensible claim based on available information.
Conclusion
Motoring expenditure is one of the most accessible tax reliefs for business owners, yet many claims remain unclaimed year after year. Whether you use the simplified mileage approach or claim actual expenses, ensuring you capture all legitimate motoring costs—and the resulting National Insurance savings—is straightforward once you understand the rules.
If you’re unsure whether you’ve been claiming enough, or want to explore whether previous years’ refunds are due, it’s worth a conversation with your accountant.
For tailored advice, contact Severn Accounting — we’re here to help.