HMRC Approved Mileage Allowance Rates

HMRC sets what they call "approved mileage allowance payments" (AMAPs) -- basically, the amount you can claim tax-free when you use your own car, van, bike, or motorcycle for work. The rates are meant to cover everything: fuel, insurance, road tax, servicing, tyres, the lot. One flat rate per mile, no receipts needed.

These rates haven't budged since 2012 for cars and vans. Motorcycles and bicycles? Not since 2002. Yes, really. The 10,000-mile threshold resets every tax year (6 April to 5 April), so you start fresh each April.

Who Can Claim Mileage Allowance

Anyone using their own vehicle for business travel can claim. The process just works differently depending on whether you're employed or self-employed.

Employees

If you use your own car, van, motorcycle, or bicycle for work journeys, you might be leaving money on the table. Your employer may already reimburse you at the full HMRC rate -- great, nothing more to do. But if they pay less than 45p per mile (or nothing at all), you can claim tax relief on the shortfall through HMRC.

Here's a real example: your employer pays 25p per mile. You drive 5,000 business miles. That's a 20p shortfall per mile (45p minus 25p). You can claim tax relief on 5,000 x 20p = £1,000. A basic rate taxpayer pockets £200; a higher rate taxpayer gets £400 back. Not bad for a bit of paperwork.

Self-Employed Workers

If you're self-employed, you've got two options. You can use the simplified mileage method (same HMRC rates as employees) or claim your actual vehicle running costs. I'd recommend the simplified method for most sole traders -- it's far less hassle and you don't need to keep a shoebox full of fuel receipts.

With the simplified method, you just deduct the mileage allowance as a business expense on your Self Assessment return, which reduces your taxable profit. One catch: once you've picked a method for a particular vehicle, you're locked in for as long as you use that vehicle for business.

What Counts as Business Mileage

Understanding the distinction between business and private mileage is crucial for making accurate claims. HMRC has clear rules about what qualifies.

Journeys You CAN Claim For

• Client or customer visits: Travelling from your workplace to meet clients, customers, or suppliers
• Between workplaces: Travelling between different company offices or sites
• Temporary workplaces: Journeys to a temporary workplace (a site you attend for less than 24 months, provided you do not expect to spend more than 40% of your working time there)
• Training courses: Travelling to external training events, conferences, or seminars
• Business errands: Trips to the bank, post office, or suppliers for business purposes
• Home-based workers: If your home is your principal place of work, journeys from home to other business locations count as business mileage

Journeys You CANNOT Claim For

• Ordinary commuting: Regular travel between your home and your permanent workplace
• Personal travel: Any journeys that are private in nature, even if they happen during the working day
• Substantially private journeys: If a journey is mainly private with a minor business element, you cannot claim the full journey

How to Keep a Mileage Log

HMRC requires you to keep contemporaneous records of your business mileage. This means recording journeys at or near the time they happen, not reconstructing them months later. A good mileage log is your best defence if HMRC queries your claim.

What to Record for Each Journey

• Date: The date of the journey
• Start point and destination: Where you travelled from and to
• Business purpose: A brief description of why the journey was necessary (for example, "Client meeting with ABC Ltd" or "Site visit to Birmingham office")
• Miles travelled: The distance of the business portion of the journey
• Vehicle used: If you use more than one vehicle for business

Methods of Record Keeping

You can keep your mileage log in any format that works for you, provided it is accurate and up to date. Options include:

• A dedicated mileage log book kept in your vehicle
• A spreadsheet on your computer (such as Excel or Google Sheets)
• A mileage tracking app on your phone (many are available free of charge)
• Your diary or calendar with mileage noted for each business journey

Claiming via P87 or Self Assessment

Claiming as an Employee (Form P87)

If your total employment expenses (including mileage) are £2,500 or less in the tax year, you can claim tax relief using form P87. This can be submitted online through your Personal Tax Account on GOV.UK or by post. The claim is straightforward and does not require you to complete a full Self Assessment tax return.

If your employment expenses exceed £2,500, you will need to register for Self Assessment and include the claim on your tax return. You should also use Self Assessment if you have other income to declare.

Claiming as Self-Employed

Self-employed individuals claim mileage allowance as a business expense on their Self Assessment tax return. The allowance is deducted from your business income, reducing your taxable profit and therefore the amount of tax and National Insurance you owe.

What You Need to Submit

• Total business miles driven during the tax year
• The amount your employer reimbursed you (if any)
• The difference between the HMRC approved amount and the reimbursement received
• Keep your mileage log as supporting evidence (you do not need to submit it with your claim, but you must have it available if HMRC asks)

Company Car Users and Advisory Fuel Rates

If you drive a company car, you cannot claim the standard HMRC mileage allowance rates. Instead, different rules apply depending on who pays for the fuel.

If you pay for fuel in a company car for business journeys, your employer can reimburse you using HMRC's advisory fuel rates. These rates vary by engine size and fuel type and are updated quarterly.

These rates are advisory, meaning employers can pay more or less than these amounts, but if they pay more, the excess is subject to tax and National Insurance.

Electric Vehicle Mileage Rates

Electric vehicles (EVs) are eligible for the same HMRC approved mileage allowance rates as petrol and diesel cars: 45p per mile for the first 10,000 miles and 25p per mile thereafter. This applies whether your EV is fully electric or a plug-in hybrid, provided you are using your own vehicle for business travel.

For company electric cars, HMRC introduced an advisory electricity rate of 7p per mile (as of the most recent update). This rate is used when employers reimburse employees for business journeys in a company electric car where the employee pays for the electricity. Like petrol and diesel advisory rates, this is reviewed periodically.

Common Mistakes When Claiming Mileage

Avoiding these common errors will help ensure your claim is accurate and stands up to scrutiny if HMRC investigates.

1. Claiming commuting miles: Your regular journey to and from your permanent workplace is not business mileage. This is the single most common mistake.
2. Not keeping records: Without a contemporaneous mileage log, you have no evidence to support your claim. HMRC can disallow claims that are not properly documented.
3. Rounding up distances: Always use accurate distances. If you regularly round up, your total claim may be significantly inflated over the course of a year.
4. Forgetting the 10,000-mile threshold: Remember that the rate drops from 45p to 25p after 10,000 business miles. Make sure you apply the correct rate.
5. Double claiming: If your employer already reimburses you at the full HMRC rate, you have nothing further to claim. Only claim the shortfall.
6. Claiming for company car mileage: The 45p/25p rates are for your own vehicle only. Company car users must use advisory fuel rates.
7. Including personal detours: If you stop for personal errands during a business journey, you should deduct the extra miles from your claim.
8. Not claiming at all: Many eligible people simply do not know they can claim, leaving money on the table. If you use your own vehicle for business, check whether you are entitled.