We all want to do our bit to save the planet and help ease climate change. And buying an electric car or van – often referred to as an electric vehicle (EV) – is one way of improving our green credentials and cutting down on our use of carbon-heavy fossil fuels. But if you’ve bitten the bullet and moved to an electric or hybrid car, how do you claim your business mileage?
In this post, I’ll be looking at exactly how you can claim mileage for your electric car, and also trying to unravel some of the complexities around this process (updated for 1st September 2023 HMRC rate changes).
- Why buy an electric vehicle?
- How do I claim business mileage?
- Claiming mileage for your own electric vehicle
- Claiming mileage for a company electric vehicle
- Claiming mileage for a hybrid
- Should I claim VAT on electric vehicle mileage?
- Making it easy to claim your electric vehicle mileage
Why buy an electric vehicle?
The UK Government is consulting on banning all sales of petrol, diesel and hybrid cars by 2035. That may sound a long way off, but within the next 12 years we’ll all have to switch to driving electric zero-emission vehicles (or get on our bikes and rely on pedal power, of course).
Moving the entire population over from petrol and diesel to a brand new technology like the electric engine is an ambitious goal (and the automotive industry is less than pleased about the whole thing!). But getting us to ditch our petrol/diesel cars is all part of a wider global move to reduce carbon emissions and combat the effects of climate change.
Electric vehicles have zero tailpipe emissions, are easy to power and can be very tax efficient to operate. But if knowing how to claim mileage for your electric car is one worry that’s putting you off, we have good news. Claiming mileage for an electric vehicle is very straightforward.
How do I claim business mileage?
When you use your own vehicle for work purposes, you can make a mileage claim and your employer is allowed to refund you the cost of your mileage.
HM Revenue & Customs (HMRC) sets the approved rates and mileage claims can be paid tax free. There’s one rate for the first 10,000 miles in the personal tax year and a lower rate for any mileage over this threshold. These Approved Mileage Allowance Payments (AMAPs) are worked out based on the type of vehicle you’re using (cars, vans, motorbikes or bikes) and the distance you’ve covered – not on the cost of fuel you’ve used.
These are the current AMAP rates per business mile:
|Type of vehicle||First 10,000 miles||Above 10,000 miles|
|Cars and vans||45p||25p|
Your employer can pay you a specified amount of travel expenses over the course of the year without having to report it to HM Revenue & Customs (HMRC). This is known as your ‘approved amount’ and things are relatively simple as long as you stick to the approved levels.
If you record your mileage using these recommended rates and submit your expenses to your employer, you’ll get back the cost of your travel. This means that you’re not out of pocket and that there’s no tedious HMRC reporting for your employer to do.
Claiming mileage for your own electric vehicle
So, how does claiming mileage work if you’re using your own electric or hybrid car for business travel? Is it any different to using a traditional petrol-engine car?
Because your mileage allowance payments are worked out based on the distance covered, not the fuel you used, you can still claim your mileage expenses for an electric car or a hybrid in exactly the same way as for a petrol or diesel car – as long as the vehicle is your own privately owned car or van.
So, if you’ve covered 12,000 business miles in your own electric car over the course of the year, this is how you’d work out your mileage expense claim:
- First 10,000 miles – 10,000 x 45p = £4,500
- Next 2,000 miles – 2,000 x 25p = £500
- Total Mileage Expense Claim – £5,000 (£4,500 + £500)
Pretty straightforward so far, right? But what about if you’re using a company car?
Claiming mileage for a company electric vehicle
Things get slightly more complicated once you’re driving an electric car or hybrid that’s a company car – in other words, a vehicle that’s owned or leased by your company, not you.
When you drive a company car, your employer pays you travel expenses based on ‘Advisory Fuel Rates’. These are worked out based on miles-per-gallon (MPG) rates for petrol/diesel cars. The Advisory Electric Rate (AER) is used for electric vehicles and is based on consumption rates and the average cost of electricity.
From the 1st September 2023, the Advisory Electric Rate is 10p per mile.
So, if you travel 12,000 business miles (as in our first example), but using a company electric car, this is how your mileage expenses are calculated.
- 12,000 business miles – 12,000 x 10p = £1,200
- Total Mileage Expense Claim – £1,200
Claiming mileage for a hybrid
Hybrid cars – those that are powered by both electric and internal combustion engines – are treated as petrol/diesel cars under the HMRC rules. Because of this, hybrid drivers have to work out their mileage claim using the Advisory Fuel Rate tables for petrol/diesel.
If you drive 50 miles a day on business, it’s roughly 3,000 miles a quarter. If your hybrid car has 2.5 petrol engine alongside the electric battery, then you can claim £750 for this quarter’s business mileage.
- The Advisory Fuel Rate for this quarter and this hybrid car (2.5 litre petrol engine and electric motor) is 25 pence per mile
- The mileage is 3,000 miles
- Total Mileage Expense Claim = 3000 x 25p = £750
Should I claim VAT on electric vehicle mileage?
And now the thorny topic of VAT on business mileage. If you claim mileage expenses for business travel, your employer can claim VAT on the fuel part of the mileage expense. But can you also do this if you’re driving an electric vehicle?
The short answer is, yes you can. But you won’t be able to claim the full 20% VAT that you’re used to. VAT on domestic electricity is charged at 5% – and, in many cases, this makes a VAT claim for the domestic electricity used to charge your car something that’s probably not worthwhile processing.
To claim the VAT on the electricity you’ve used to charge your electric vehicle, you need electricity bills that cover the amount claimed. The electricity bill must also be a VAT-compliant bill. And some electricity companies only supply VAT-compliant bills to customers on commercial tariffs, not domestic tariffs.
The VAT that can be claimed is small, as you can see in this example:
If you drive 50 miles a day on business, it’s roughly 1,000 miles a month.
- The Advisory Electric Rate for this quarter is 10 pence per mile
- The mileage is 1,000 miles
- The VAT rate is 5% on the supply of domestic electricity (VAT fraction is 1/21)
- Fuel portion of mileage claim = 1000 x 10p = £100
- The VAT on mileage is £100/21 = £4.76
So, if you drive 1000 miles a month in a fully electric car then you can claim £100 for a month’s business mileage; and £4.76 in VAT. You must also have a VAT-compliant electricity bill of at least £100.
The VAT amount you can claim is small. And you may have issues getting VAT-compliant domestic electricity bills from your provider. Because of this, it may not be worth the effort to claim the VAT on your business mileage made in electric vehicles.
Making it easy to claim your electric vehicle mileage
If you’re a Tripcatcher user, you can use Tripcatcher to claim mileage for your electric vehicles but not the VAT. Follow the link to see how simple it is to set up electric vehicle mileage in your Tripcatcher account.
If you would like to find out more about Tripcatcher, you can try out the 14-day FREE trial. If you have any questions please do contact Suzanne at firstname.lastname@example.org – she’ll be very happy to help.
Sign up, submit your mileage and take the hassle out of claiming the mileage for your electric car.