What Is the Mileage Allowance?
The mileage allowance is a set rate per mile that employers can pay employees for using their own vehicle for business travel. HMRC publishes Approved Mileage Allowance Payments (AMAPs) rates, and payments up to these rates are tax-free and NIC-free for both the employer and employee.
If the employer pays less than the approved rate (or nothing at all), the employee can claim Mileage Allowance Relief (MAR) on their tax return for the difference.
HMRC Approved Mileage Rates
The car and van rate for the first 10,000 business miles increased from 45p to 55p on 6 April 2026:
| Vehicle Type | First 10,000 Miles | Over 10,000 Miles |
|---|---|---|
| Cars and vans | 55p per mile | 25p per mile |
| Motorcycles | 24p per mile | 24p per mile |
| Bicycles | 20p per mile | 20p per mile |
The 10,000-mile threshold applies per tax year (6 April to 5 April), not per calendar year or per journey.
Passenger Payments
If an employee carries a fellow employee as a passenger on a business journey, the employer can pay an additional 5p per mile per passenger, tax-free. The passenger rate applies regardless of the number of miles driven.
What Counts as Business Travel?
Business mileage includes travel that is necessary for performing your job. It does not include commuting — the journey between home and your normal place of work.
Qualifying Journeys
| Journey Type | Qualifies? |
|---|---|
| Travel between two workplaces | Yes |
| Visit to a client or customer | Yes |
| Travel to a temporary workplace (up to 24 months) | Yes |
| Attending a training course | Yes |
| Travel to a meeting at another location | Yes |
| Home to normal permanent workplace | No (commuting) |
| Home to the same temporary workplace for more than 24 months | No |
Temporary Workplaces
A temporary workplace is somewhere you attend for a limited period or for a temporary purpose. If you attend the same location for more than 24 months (or expect to), it becomes a permanent workplace and travel to it no longer qualifies.
How Employers Pay the Mileage Allowance
Paying Up to the Approved Rate
If an employer pays employees at or below the AMAP rate, the payment is:
- Not taxable as employment income
- Not subject to employee or employer National Insurance
- Not reported on the employee’s P11D
- A tax-deductible expense for the employer
Paying Above the Approved Rate
If the employer pays more than the AMAP rate, the excess is:
- Taxable as earnings through PAYE
- Subject to Class 1 National Insurance contributions
- Must be reported and taxed in real time through payroll
Paying Below the Approved Rate
If the employer pays less than the AMAP rate (or pays nothing), the employee can claim Mileage Allowance Relief on the shortfall.
Mileage Allowance Relief for Employees
Employees who receive less than the approved rate from their employer can claim the difference as a tax deduction. This is done through:
Self-Assessment
If the employee files a self-assessment tax return, the mileage relief is claimed on the employment pages.
Form P87
Employees who do not file self-assessment can claim using HMRC form P87 (claim for tax relief for employment expenses), provided their total employment expense claims are £2,500 or less.
Calculation Example
| Item | Amount |
|---|---|
| Business miles driven | 8,000 |
| AMAP rate (first 10,000 miles) | 55p per mile |
| Approved amount | £4,400 |
| Employer paid | £2,400 (30p per mile) |
| Mileage Allowance Relief | £2,000 |
The employee claims £2,000 as a deduction against their employment income. If they are a basic rate taxpayer (20%), this saves them £400 in income tax.
Sole Traders and Partnerships
Self-employed individuals can also use the AMAP rates instead of claiming the actual cost of running a vehicle. This is known as the simplified expenses method:
| Method | How It Works |
|---|---|
| Simplified expenses (AMAP rates) | Claim 55p/25p per mile for business journeys |
| Actual costs | Claim the business proportion of all vehicle running costs (fuel, insurance, repairs, depreciation) |
Once you choose a method for a particular vehicle, you must stick with it for as long as you use that vehicle in your business. You cannot switch between methods.
The simplified mileage rates for self-employed individuals are 55p for the first 10,000 miles and 25p thereafter from 6 April 2026.
Company Cars
The mileage allowance described above applies only to employees using their own vehicle. If an employee uses a company car for business travel, different rules apply. Instead of AMAPs, employers use HMRC’s advisory fuel rates, which vary by fuel type and engine size and are much lower than AMAPs because they cover fuel only.
HMRC reviews and publishes the advisory fuel rates quarterly, so check the current table before setting reimbursement rates. These rates cover the cost of fuel only — the company already bears the other running costs of the vehicle. If the employer pays more than the advisory rate for private fuel, it becomes a taxable benefit.
Electric Vehicles
The AMAP rates apply to electric vehicles in the same way as petrol or diesel cars. There is no separate rate for EVs when employees use their own electric car for business travel.
For company electric vehicles, HMRC publishes a separate advisory electricity rate alongside the fuel rates, updated on the same quarterly cycle.
Record Keeping
Accurate mileage records are essential for supporting any claim. Records should include:
- Date of each business journey
- Start and end locations
- Purpose of the journey
- Miles driven (odometer readings or calculated distance)
- Passenger details if claiming the passenger rate
Mileage Log
A mileage log (paper or digital) should be maintained contemporaneously — that is, recorded at the time of each journey rather than compiled retrospectively. HMRC may challenge claims that are not supported by detailed records.
Reporting Requirements
For Employers
| Situation | Reporting |
|---|---|
| Payments at or below AMAP rates | No P11D entry required; report on form P11D(b) if no dispensation |
| Payments above AMAP rates | Tax excess through payroll as earnings |
| No mileage payments made | No employer reporting; employee can claim MAR |
For Employees
If claiming Mileage Allowance Relief, retain all mileage records for at least 4 years after the end of the tax year.
Interaction with Other Taxes
Mileage allowance payments are outside the scope of VAT — they are employment-related payments, not supplies of goods or services. However, a VAT-registered business can reclaim VAT on the fuel element of mileage payments if it obtains a valid fuel receipt from the employee. The fuel element is calculated using HMRC’s advisory fuel rates.
The mileage allowance is a tax-deductible expense for the employer against corporation tax or income tax. Proper accounting records of all mileage payments should be maintained alongside your main business accounts.