Are you a small business owner or employee who uses your own car for business journeys? Mileage claims are a fantastic way to save money on your travel costs: with some savvy record keeping, you can pocket valuable tax relief each year. This friendly guide breaks down everything you need to know about how HMRC mileage allowances work, what you can claim, and top tips to keep things headache-free.
What Does Mileage Allowance Cover?
When you claim mileage using HMRC’s approved rates, you’re covering much more than just the fuel:
- Fuel
- Insurance
- Servicing & Repairs
- Depreciation
- MOT
That’s right: you don’t have to keep every receipt for petrol, the MOT, or your repairs. Just keep a clear and accurate mileage log, and you’re covered.
How Much Can You Claim in 2025/26?
The government sets special “approved rates” so you don’t have to work out all your true expenses. For the tax year 2025/26, here’s what you can claim for using your own car for business:
• 45p per mile for the first 10,000 business miles in a tax year
• 25p per mile for each additional mile above 10,000
• Bonus! Carrying a colleague on business? Add 5p per mile per passenger
• Extras: You can also claim for things like parking fees and tolls: these are on top of your mileage.
Example:
If you drive 12,000 business miles in a year:
• 10,000 miles × 45p = £4,500
• 2,000 miles × 25p = £500
• Total claim: £5,000
What Counts As Business Mileage?
Knowing which journeys count can be a big money-saver! HMRC lets you claim for all the miles you’re “on business”: but not for your regular commute.
You can claim for trips to:
• Clients, suppliers, or customers
• Temporary workplaces (somewhere you work for less than 24 months)
• Offsite meetings, conferences, or training
You can’t claim for:
• Your regular commute from home to your normal office or place of work
Quick tip:
A “temporary workplace” is a location you’ll work at for less than two years: like a client’s office or a special project site.
What Records Do You Need to Keep?
The golden rule: no log, no claim! But don’t worry: keeping a mileage record can be easy and paperfree.
Your log should include:
- Date of the journey
- Reason for the journey (e.g. “client meeting,” “CPD training”)
- Start and end locations
- Total miles driven
- Your vehicle’s make, model, and registration
Whether it’s a simple notebook, a spreadsheet, or even a mileage-tracking app, find what works for you and stick to it.
For Employees: How Does Tax Work?
If you’re employed and get paid mileage by your company:
• If your employer pays you at or below HMRC’s rates, it’s tax-free!
• If you’re paid less than HMRC’s rates, you can claim Mileage Allowance Relief (MAR) on the difference: directly from HMRC, usually through your tax return or a form P87.
• If you’re paid more than HMRC rates, the extra is seen as taxable income (and will show up in your payslip).
For Employers: Your Mileage Duties
If you’re running payroll or processing staff claims, here are your key responsibilities:
• Pay mileage at or below HMRC rates for a fuss-free process (no reporting needed).
• If you pay more than the approved rate, you must report the extra on a P11D and pay tax and National Insurance.
• Mileage expenses reduce your company’s corporation tax bill: they’re a deductible expense.
• VAT registered? You can reclaim VAT on the fuel element of mileage (using HMRC’s Advisory Fuel
Rates/AFRs).
Example:
For a petrol car (up to 1400cc), the AFR is 12p per mile.
Drive 200 miles on business:
200 × 12p = £24 (that’s the “fuel” part)
You can reclaim the VAT on £24 = £4 VAT back!
At a Glance: Mileage, VAT, and Corporation Tax
| Mileage Band | Rate per Mile | Example (miles) | Total Claim |
|---|---|---|---|
| First 10,000 | 45p | 10,000 | £4,500 |
| Each mile > 10,000 | 25p | 2,000 | £500 |
| TOTAL | 12,000 | £5,000 |
If you’re VAT registered, claim VAT on the fuel part using Advisory Fuel Rates.
FAQs & Don’t Forget!
• No VAT claim if you’re not VAT registered, or if you use the Flat Rate Scheme.
• You can’t claim for home-to-work commuting: this is classed as private travel.
• Most importantly: Always keep your mileage logs up to date. HMRC loves good records and may ask to see them.
Common extra claims:
• Parking charges for business journeys
• Road tolls on your route (Remember, these are claimed separately, not in your 45p/25p per mile!)