Landlords in the UK with an unincorporated property business can claim a mileage allowance to reduce the tax on property. The mileage allowance for landlords is in the form of a deduction in transport expenses, which can be used as an alternative to capital allowances based on actual costs incurred.
In this post, we will explain how landlords can claim a mileage allowance. For in-depth information about the mileage allowance, you should contact experienced landlord accountants near you.
Mileage Allowance for Landlords: An Overview
Landlords in the UK are allowed to claim a mileage allowance. The rates for mileage allowance for landlords in the UK are the same as those that are paid to employees tax-free for the use of business cars, i.e. 45 pence per mile for the first 10,000 miles, 24 pence per mile for mileage in excess of 10,000 miles for motorcycles, and 25 pence per year for cars and vans.
Who can Benefit from Mileage Allowance?
Mileage allowance is for individuals or partnerships that consist only of individuals who use cars, vans, or motorcycles for inspection of the property. The allowance is not for corporate landlords.
Individual landlords can use mileage rates to claim expenses instead of actual costs incurred. Since 2013, landlords have been allowed to claim only actual vehicle expenses. However, after Budget 2017, they are allowed to claim expenses based on the default mileage rates.
Landlord Mileage Claim Example
Let’s suppose that a landlord has a rental property that is located about 20 miles away. Throughout the tax year, the landlord travels to the property five times in a personal car. The total number of miles driven during the tax year is 200. In this situation, the landlord mileage claim will be £90 (£200 * 45p).
Keep in mind that the mileage rates will be available only if the capital allowance has not been claimed previously. If the capital allowance has already been claimed, the landlord may have to wait until the tax year for which the claim-back mileage allowance has expired. For instance, if the landlord has claimed mileage reimbursement for the period 2013–2016, the mileage rates can be claimed from 2017 onward. However, this will prevent further claims based on capital allowances.
Record of Landlord Mileage Claim
Mileage claims can be recorded by filling out a claim form for each property. This will help the landlord Accountant to calculate the correct mileage. Your accountant can create a mileage template that you need to fill out to record expenses for each trip. The template needs to be updated every time you make a trip to the property.
Keep in mind that the 45 pence, which is the mileage rate allowed for each vehicle, is not affected by the number of people in the vehicle. The rate generally covers the general running costs, wear and tear, insurance, and fuel costs. However, you cannot claim additional costs above the mileage rate.
Also, you cannot claim combined mileage for the rental property with personal visits. For instance, suppose that your rental property is located in Leeds. You decide to visit your friends, who are also located in the area. You cannot combine the trip to your friends with the rental property mileage, which HMRC calls a ‘duality of purpose’. Also, you cannot combine a trip to the property with a trip to the supermarket.
If you own a property as an individual, you should contact an experienced landlord accountant to find out how to claim mileage reimbursements. There are specific rules that you should follow to claim a mileage allowance.
The mileage you claim should be for managing and repairing the rental property. Your rental mileage will depend on the location from which you manage your rental properties. This can be from your home or an office. In this context, you should note that you cannot claim mileage charges if you allow a letting agent to visit your property. This is because in this case, the base of the property would not be your home or office address but the agent’s address.
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