Mileage Tracking for Business: What You Need to Know

Why Mileage Tracking Is Worth Your Attention

Vehicle costs are one of the largest unrecovered expenses for many small business owners and self-employed individuals. If you use your personal car for business purposes - client visits, site inspections, supplier meetings, trips to the post office - you are entitled to claim a deduction for the business proportion of those costs. In the UK, HMRC's approved mileage rate for the first 10,000 business miles per year is 45p per mile, dropping to 25p beyond that. In the US, the IRS standard mileage rate is updated annually (67 cents per mile for 2024). These rates cover fuel, wear and tear, insurance, and depreciation.

On 10,000 business miles, the UK deduction alone is £4,500. For a sole trader paying tax at the basic rate, that's £900 in tax saved. For a higher-rate taxpayer, it's £1,800. Most business owners who drive regularly for work leave a significant sum on the table every year simply because they didn't record their journeys.

What Counts as a Business Mile?

Not every mile you drive in connection with work qualifies as a business mile. The rules are specific:

• Business miles: Travel to a client's premises, travel to a temporary work location, travel between multiple business locations, travel to a supplier or professional adviser
• Not business miles: Commuting from home to your regular, permanent place of work; personal errands; travel for mixed personal/business trips (only the business portion qualifies)
• Grey area: Travel from home to a one-off meeting at a different location may qualify as business travel - the key test is whether the destination is a temporary rather than a regular workplace

When in doubt, record the journey and note the business purpose, and let your accountant make the final determination. The cost of recording a journey you end up not claiming is zero. The cost of not recording a journey you were entitled to claim is the lost deduction.

What Your Mileage Log Must Include

A mileage log must be contemporaneous - recorded at the time of the journey, not reconstructed from memory at year end. A retrospectively estimated mileage log is unlikely to survive an audit. For each journey, your log should record: the date, the start and end locations, the purpose of the trip and the business reason for it, the odometer reading at the start and end of the journey (or the distance from a mapping application), and the total miles for the trip.

Related reading: how to track business expenses for a complete approach to expense management.

Methods for Tracking Mileage

There are four main approaches, ranging from manual to fully automated:

1. Manual logbook: A physical notebook kept in the car. Reliable as long as you remember to fill it in. Easy to forget, and inconvenient to transcribe into your accounts at year end.
2. Spreadsheet: A mileage spreadsheet updated after each journey. More organised than a paper logbook and easier to total at year end, but still requires manual data entry.
3. Mileage tracking app: Apps like MileIQ or TripLog use your phone's GPS to detect journeys automatically. You classify each journey as business or personal after the fact. Much lower effort than manual logging and highly accurate.
4. Accounting software with integrated mileage tracking: The most integrated solution - journeys are recorded and automatically converted to expense entries in your accounts at the applicable HMRC or IRS rate.

Two Methods for Claiming Vehicle Costs

In the UK, sole traders can choose between two methods. The simplified mileage method uses HMRC's approved rates (45p/25p per mile) and requires only a mileage log. The actual cost method claims the business proportion of your actual vehicle running costs - fuel, insurance, servicing, MOT, road tax - based on your total vs. business mileage ratio. The actual cost method can be more beneficial for high-mileage or expensive-to-run vehicles, but requires significantly more record-keeping. Once you've chosen a method for a vehicle, you must stick with it for the life of the vehicle. Consult your accountant before making this decision.

How Note.now Makes This Easy

Note.now includes mileage tracking that lets you log trips directly in the app with the start point, end point, and business purpose. The system calculates the deductible amount at the applicable rate automatically. All mileage records are stored alongside your other expense records, ready for your tax return. See also: best practices for storing receipts. Explore expense tracking in Note.now, or start free.