Mileage Allowance In The UK For Employees
This article is for employees using their own vehicles for work who are trying to make sense of HMRC’s mileage allowance laws and how to apply them. We focus on the general mileage rules you should be aware of when it comes to mileage allowance, rates and what is taxable.
Automate your vehicle log book and spend your time on something more interesting. Let Driversnote worry about your mileage tracking.
If you’re self-employed, check our guide on mileage allowance for the self-employed.
HMRC mileage allowance rules
If you incur business mileage using your private vehicle as an employee, you can receive Mileage Allowance Payments (MAPs) from your employer for your mileage expenses.
A mileage allowance is considered to be one of the following:
- A monthly payment based on a per-mile rate for your business mileage.
- A monthly payment based on a reasonable business mileage estimation.
- A monthly lump sum covering vehicle costs based on reasonable estimates of your business mileage; or
- A combination of the above - e.g. a monthly lump sum for vehicle expenses and a fuel rate per mile at a lower reimbursement amount.
What the mileage allowance covers
The mileage allowance payments cover vehicle expenses such as fuel, vehicle maintenance, depreciation, insurance and road tax.
Mileage allowance in the UK does not cover tolls, parking fees, congestion charges and fines for road offences.
Note that it doesn’t matter if you drive one or more vehicles of the same kind (e.g. you use two or more personal cars) - mileage is calculated and reimbursed altogether.
HMRC mileage allowance rates
HMRC provides Advisory MAP (AMAP) amounts for employers, meaning they are not obligatory. Your employer might choose to reimburse you at a lower or higher rate, or not reimburse you at all, and the rate that your employer pays out can usually be found in your employment contract.
The current advisory mileage allowance rates per mile are:
- 45p for cars and vans for the first 10,000 miles. After 10,000 miles, the rate changes to 25p per mile.
- 24p for motorcycles regardless of miles driven.
- 20p for bicycles regardless of miles.
See more about the 2023 HMRC mileage rates.
If you are paid the advisory rates, HMRC considers this payment to be an “approved amount”. If you receive less than the advisory amount from your employer, you are entitled to tax relief. Read more about Mileage Allowance Relief (MAR) and if you are eligible to receive it.
How to receive HMRC mileage allowance from your employer
You will need to prove to your employer that you have driven business mileage for each month to receive MAP. You can do so by providing a mileage log to your employer or the firm’s accountant.
The mileage log, as stated by HMRC, should contain:
- the date and purpose of your trip
- the distance travelled
- the start and end address of each work-related trip (including postcodes)
Continue reading below to find out the best way to record your mileage.
Your allowance will most likely be based on the per-mile HMRC mileage allowance rates. The sum you receive will then be based on the mileage you have driven, multiplied by your employer’s mileage rate.
Here’s an example:
You have driven 500 miles this month and your employer reimburses you at the HMRC approved 45p per mile.
Your reimbursement for the month can be worked out with the below formula:
[business miles x rate = reimbursement], or 500 x 0.45 = £225
Is mileage allowance in the UK taxable?
The mileage allowance you receive is only taxed if you are paid more than the approved mileage amount. The below examples should help you figure out if your mileage allowance will be taxed.
I am paid precisely the approved amount
When you are reimbursed with the approved amount for mileage, the whole sum goes directly to you and your employer has nothing to declare to HMRC.
I am paid less than the approved amount
If you are paid less than the approved amount your employer has nothing to declare to HMRC, you receive the whole sum, and you will be able to claim Mileage Allowance Relief (MAR) for the remainder of the mileage allowance you’re entitled to.
I am paid more than the approved amount
If your employer reimburses you at a higher mileage allowance rate than the one set by HMRC, that extra reimbursement will be considered personal benefits and will be taxed as income through PAYE.
National Insurance scheme
Besides the general rules on mileage allowance, you should be aware of the National Insurance (NI) scheme that may affect mileage allowance payments from your employer.
Relevant motoring expenditures
Relevant motoring expenditures (RMEs) are defined as motoring-related payments made to an employee including:
- Mileage Allowance Payments
- Payments that would be MAP paid to any other person for your benefit (e.g. if your employer pays your vehicle maintenance bill directly to the car service)
- Any other payments that are made towards the use of your vehicle for business purposes
The National Insurance scheme covers RMEs and has a “Qualifying Amount” that, if surpassed, will be taxed through the Class 1 National Insurance.
The qualifying amounts are as follows:
- 0.45p per business mile for cars and vans
- 0.24p per business mile for motorcycles
- 0.20p per business mile for bicycles
Read more about the qualifying amount.
If the RMEs are lower or equal to the Qualifying amount, your employer has nothing to declare and no NI to pay. If the RMEs are higher than the Qualifying Amount, the excess is added to your earnings when calculating Class 1 National Insurance through payroll. There is no tax relief for the NI scheme.
Additional reimbursements - passenger payments
You can receive reimbursement from your employer if you take fellow employees as passengers with you when driving for business. Passenger payments are available so long as both you and your colleague are travelling for work purposes.
HMRC has set an approved rate of 5p per mile per passenger.
Keep in mind the following:
- The reimbursement applies only if you take passengers in a car or a van.
- If you are paid up to 5p per mile per passenger, the sum is tax-free. Anything over 5p is taxable as a part of your income.
- It’s important to note that passenger payments can only be paid by your employer, not HMRC. Unlike general mileage, there is no Mileage Allowance Relief available if an employer chooses not to make passenger payments, or pays at a lower rate than 5p per mile per passenger.
What’s the best way to record mileage?
You have a few options for how to record your mileage - a manual input log book, a spreadsheet or an automatic digital tracker.
You can choose to write down all your business trips manually in paper format or a digital spreadsheet. In this case, you will have to spend time inputting the correct information every day you have had business trips so it is as accurate as possible. The process can get rather tedious if you often travel for work. Paper logbooks are available at many newsagents and similar stores.
If you choose to track your miles automatically, you have the option of selecting a mileage tracker app - there are quite a few for both iOS and Android devices. They track your mileage automatically through GPS while you are driving. Our app, Driversnote, helps you track your business travel and provides HMRC compliant mileage reports. Choosing an app removes the hassle of remembering details and spending time inputting information manually or having to remember details of every trip you take.