How To Save Tax By Cycling For Work

Introduction

The health and environmental perks of cycling are undeniable. But there's another dimension often overlooked: potential tax benefits.

If you're a limited company owner that uses your bike for business travel, understanding these benefits can lead to significant tax savings.

Here’s how it works: 

• If you use your own bike for business journeys, you can claim back 20p for every mile you cycle for qualifying business journeys. 
• This 20p per mile rate is designed to cover all the costs associated with using your bicycle, such as maintenance and wear and tear.
• This mileage expense is tax deductible for the company, and tax free for you to receive. 
• In effect, you get paid to get fit, and over the course of a year, this can really add up.

Pro-tip: Use tools like Mighty to effortlessly log these business journeys and automatically apply the tax savings for you. 

The rules: 

• You must personally own the bicycle.
• The bike can be pedal or electric, but it must be a pedal bike. E-scooters do not count. 
• Claimed mileage must be to a temporary place of work - this can include a client meeting, picking up supplies or attending a conference. 
• You cannot claim mileage for commuting to your office or co-working space. 

An example: 

• If you cycle 1,000 qualifying miles during the year, you can claim £200 of mileage expenses back from your company. 
• This will save your company up to £50 of corporation tax per year and means you can pay yourself £200 tax free from your company. 

How to claim cycling mileage expenses

To claim the mileage expenses it’s important to keep records of your travel. 

How to claim in Mighty: 

• Go to the ‘Mileage Tracker’ in Mighty
• Click ‘Add an expense;
• Choose ‘Bicycle’
• Add the date, the start and end locations of your journey and purpose of the trip

Mighty will do the rest, logging your mileage, applying the tax saving and amount which you can now pay yourself tax free. 

Once the mileage is logged, all travel expenses will be tax deductible for the company, and can be paid directly back to you right away from the business bank account.

When claimed correctly, the business mileage is tax deductible for the company and you won't have to pay tax or national insurance on the amount you reimburse yourself for business travel.

How to claim manually‍

Alternatively you can use a spreadsheet to note down every business-related journey you undertake, detailing the date, start point, end point, total miles and purpose of the trip. You should then pass this to your accountant to manually include in your accounts and tax return.

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Thinking about buying a new bike?

If you’re a limited company director and thinking about buying a new bike, you can make potentially huge tax savings by purchasing the bike through your limited company.

Learn how to do this here: https://www.mightyaccounting.com/blog/buying-a-bike-through-your-business 

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Conclusion

Cycling offers a trifecta of benefits: environmental, health, and financial. While you save the planet and boost your health, let Mighty guide you in unlocking tax benefits.

Try Mighty today! Our platform ensures you don't miss out on potential savings, making the entire process as smooth as a well-oiled bicycle chain.