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Mileage Allowance Payments for Business Travel

If your employees use their own vehicles for business travel, you can reimburse them using HMRC's approved mileage rates without creating a tax or National Insurance liability. Understanding these rates—and what happens when you pay more or less than the approved amounts—helps...

Introduction

What are Approved Mileage Allowance Payments?

Approved Mileage Allowance Payments (AMAPs) are tax-free amounts you can pay employees who use their own vehicles for business journeys. These payments are called "Mileage Allowance Payments" (MAPs) and cover the cost of using a car, van, motorcycle or bicycle for work purposes.

The key point is that the payment must go directly to the employee—not to someone else on their behalf. Only payments made this way qualify for the tax-free treatment described here.

The approved mileage rates

HMRC sets maximum rates you can pay tax-free. These rates have applied since the 2011/12 tax year and remain current for 2025/26:

Cars and vans (including electric and hybrid vehicles):

45p per mile for the first 10,000 business miles in a tax year
25p per mile for every mile over 10,000

Motorcycles (including electric bikes that aren't electrically assisted pedal cycles):

24p per mile for all business miles

Bicycles (including electrically assisted pedal cycles):

20p per mile for all business miles

These rates apply separately to each type of vehicle. If an employee uses different vehicles of the same type (for example, two different cars), you treat them as though they were the same vehicle when calculating the 10,000-mile threshold.

What the approved rates cover

The approved mileage rates are designed to cover all the general running costs of the vehicle, including:

Fuel
Servicing and repairs
Tyres
Road tax (vehicle excise duty)
Insurance
Depreciation
Interest on loans taken out to buy the vehicle

Because these rates cover all vehicle-related costs, employees cannot claim additional tax relief for these expenses if they're receiving mileage payments.

However, the rates don't cover journey-specific costs such as:

Parking charges
Road tolls
Congestion charges
Overnight accommodation

Employees can claim separate reimbursement or tax relief for these expenses under the normal expenses rules.

Passenger payments

You can make additional tax-free payments when an employee carries work colleagues as passengers on business journeys. This applies whether the employee uses their own car or van, or a company vehicle.

The approved rate is 5p per mile per passenger. You can pay this amount for each passenger carried on the same journey.

The journey must be business travel for both the driver and the passenger, and you must make the payment specifically because passengers are being carried—not just for the travel itself.

When you pay exactly the approved amount

If you pay exactly the approved mileage rates and no more, you don't need to report anything to HMRC. You should not include these payments on forms P11D or payroll them as a benefit. The payments are simply tax-free and National Insurance-free.

You should still keep proper records showing the business miles travelled (not the actual expenses incurred) to demonstrate that your payments qualify for the exemption.

When you pay more than the approved rates

If you pay more than the approved rates, the excess becomes taxable. You must:

Report the excess amount on form P11D, or
Payroll it as a benefit (if you've registered to payroll benefits)

The excess is treated as taxable profit for Income Tax purposes and as earnings for Class 1 National Insurance purposes.

When you pay less than the approved rates (or nothing)

If you pay less than the approved rates—or don't reimburse your employee at all—they can claim tax relief for the difference. This is called Mileage Allowance Relief (MAR).

The employee claims this relief through their Self Assessment tax return, or by contacting HMRC directly if they don't complete a tax return.

For example, if an employee travels 5,000 business miles and you pay 30p per mile (£1,500), they can claim tax relief on the shortfall of 15p per mile (£750). The actual tax relief they receive depends on their Income Tax rate.

Note that this relief doesn't apply to passenger payments. If you pay less than 5p per mile per passenger (or nothing), the employee cannot claim any relief for the shortfall.

Employees with multiple jobs

If an employee works for two or more associated employers (companies under common control), you must add together all their business travel when calculating whether they've exceeded the 10,000-mile threshold for cars and vans. This prevents employees from claiming the higher 45p rate multiple times across different associated employments.

Company cars: a different system

The approved mileage rates described in this article only apply to employees using their own vehicles. If your employee uses a company car for business travel, different rules apply.

For company cars, HMRC publishes "advisory fuel rates" that you use when reimbursing fuel costs for business journeys. These rates vary by engine size and fuel type, and HMRC reviews them quarterly on 1 March, 1 June, 1 September and 1 December.

As of 1 March 2026, the advisory electric rates for fully electric company cars are:

7p per mile for home charging
15p per mile for public charging

If your company car is a hybrid, it's treated as either a petrol or diesel car for advisory fuel rate purposes.

Optional remuneration arrangements

If mileage payments form part of an optional remuneration arrangement (sometimes called salary sacrifice), they don't qualify for tax exemption. The employee is taxable on the full amount of salary or cash given up, not on the value of the mileage payment received.

This rule has applied since 6 April 2017 and affects arrangements where employees choose to give up salary in exchange for mileage payments.

Keeping proper records

Even though payments within the approved limits are tax-free and don't need reporting to HMRC, you must keep adequate records. Your records should show:

The date and purpose of each business journey
The destination
The number of miles travelled
Any passengers carried (for passenger payment claims)

Records should focus on miles travelled, not actual expenses incurred. Good record-keeping protects you if HMRC queries whether your payments genuinely qualify for tax exemption.

Sources

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.

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