If you own a limited company and use your personal car for business travel, you can reimburse yourself at HMRC’s approved mileage rates without paying income tax and National Insurance. The payment also counts as a deductible company expense, which saves Corporation Tax on your limited company too.
Approved rates
HMRC sets Approved Mileage Allowance Payment (AMAP) rates that allow you to reimburse yourself at or below these rates while paying no tax or NI:
| Vehicle | First 10,000 miles | Above 10,000 miles |
| Cars & vans | 45p per mile | 25p per mile |
| Motorcycles | 24p per mile | 24p per mile |
| Bicycles | 20p per mile | 20p per mile |
It’s worth noting that carrying a fellow employee or director as a passenger on a business journey, you can claim an additional 5p per mile per passenger on top of your standard mileage rate, which is tax-free too.
What counts as a business journey?
Most client visits, supplier trips, and off-site meetings qualify, whereas regular commuting to a fixed workplace does not. However, if you work from a home office, travelling from home to a client’s premises typically counts as a business journey because your home is your permanent workplace.
Example:
If you drive 8,000 business miles in a tax year:
- LTD company pays you: 8,000 × 45p = £3,600 tax-free
- LTD company Corporation Tax saving (at 25%): £900
- Net cost to the company after tax relief: £2,700
Consequently, you take home £3,600 tax and NI-free, and the company saves £900 on its Corporation Tax bill. Compared to taking the same amount as salary, where you could potentially lose a significant amount to income tax and NI.
Company cars
Some directors use company cars instead of claiming business mileage. When a limited company owns a vehicle and you have any private use of it, HMRC charges a Benefit in Kind based on the car’s list price and CO2 emission, meaning you pay income tax on it, and the company pays Class 1A NI. That being said, BiK rates on electric vehicles (EVs) are currently very low, making a company-owned EV potentially very tax-efficient.
If you’d like to find out more about the usefulness of putting your personal car through your limited company, get in touch. Give us a call on 01905 777600 or drop us an email on hello@ormerodrutter.co.uk to book a free initial consultation.
