Mileage allowance in the UK for employees

PUBLISHED JUL 28, 2020 • 6 MIN READ

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. Keep reading to learn about the general rules you should be aware of when it comes to mileage allowance, rates and what is taxable.

If you are self-employed, skip to our guide on mileage allowance for the self-employed.

General rules on mileage allowance

If, as an employee, you incur business mileage using your private vehicle, you can receive Mileage Allowance Payments (known as MAPs) from your employer.

A mileage allowance is considered to be one of the following:

  • Monthly payments based on your business mileage.
  • Monthly payments 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’s included in a MAP?

The mileage allowance payments cover the following vehicle expenses:

  • Fuel
  • Servicing and repairs
  • Maintenance
  • Depreciation
  • Insurance and road tax

What isn't included in a MAP?

  • Road, bridge, tunnel tolls
  • Parking fees
  • Congestion charges
  • Speeding or parking fines, other road offences

Does HMRC guide employers on how much a MAP should be?

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 and the rate that your employer goes by 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.

If you are paid the advisory rates, HMRC considers this payment to be an “approved amount”. If you receive less than the advisory amount, you are entitled to tax relief.

Read more about current and historical mileage rates here.

Is my mileage allowance taxable?

Mileage allowance is only taxed if you are paid more than the approved mileage amount. The below examples should help in understanding the rules here:

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).

I am paid more than the approved amount

If your employer reimburses you at a higher MAP rate, that extra reimbursement will be considered personal benefits and will be taxed as income through PAYE.

I occasionally have to drive colleagues for work - can I claim an additional amount for this?

If you often take passengers with you when driving for business, your employer may choose to reimburse you for the associated costs. Passenger payments are available so long as your travel is for work purposes, and your passenger is also 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 made to you 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 are the requirements to receive a mileage allowance?

Your MAP will 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 40p per mile.

Your reimbursement for the month can be worked out with the below formula:

[business miles x rate = reimbursement], or 500 x 0.40 = £200 

What if I use more than one vehicle for work?

It doesn’t matter if you use more than one vehicle (of the same kind) for work––mileage is calculated and reimbursed all together. Here’s are two examples:

  • You drive two cars for the same job, driving 3000 miles with Car One and 6000 miles with Car Two. Your employer uses HMRC's AMAP rate of 45p per mile.

Since the total mileage does not exceed 10,000 miles, you can be reimbursed at 45p per mile for your total mileage.

Once again, using the above formula of [business miles x rate = reimbursement], your mileage calculation is 9,000 x 0.45 = £4,050 

  • Alternatively, you have driven 5000 miles with Car One and 6000 with Car Two. Your employer still uses HMRC's AMAP rate of 45p per mile up to 10,000 miles, and 25p per mile for additional miles.

Based on the rules above, you can be reimbursed at 45p for the first 10,000 miles, while the remaining 1,000 miles can be reimbursed at 25p. You simply follow the above formula twice:

[10,000 x 0.45] + [1,000 x 0.25] = £4,750 

Do I need to provide records to receive a MAP?

You will need to prove to your employer that you have driven business mileage for each month to receive MAP. You can do this 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
  • distance travelled
  • start and end address of each work-related trip (including postcodes)

Keep in mind that the MAP only covers costs of:

  • Travel between your permanent workplace and your temporary work (e.g. visiting clients or suppliers)
  • Travelling between temporary workplaces
  • Travel between two workplaces in the same employment
  • Travelling from home to another workplace if “home” is your permanent workplace due to the requirements of the job

Exemptions:

  • Ordinary commuting to and from work isn’t considered a business trip
  • Private mileage isn’t considered a business trip

Read more about what HMRC considers to be business travel.

What’s the best way to record my miles?

You have several options available to help you track your mileage - common ones include a paper logbook, a spreadsheet, and an automatic digital tracker.

Paper logbooks are available at many newsagents and similar stores. If you wish to use a spreadsheet, HMRC has created a digital template that you can use in Excel or a similar program. To complete this accurately, 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 quite tedious if you take a lot of business trips.

If you choose to track your miles automatically, you have the option of selecting a mileage tracker app for your mobile - 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 is also HMRC compliant. 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. 

How to claim mileage from HMRC

If your employer pays you less than the approved mileage allowance, you are entitled to Mileage Allowance Relief (MAR) in the form of tax deductions on the outstanding MAP.

We've written up a guide to show you how to claim mileage through HMRC - skip ahead to Mileage Allowance Relief here.

National Insurance scheme

Besides the general rules on mileage allowance, you should be aware of the National Insurance (NI) scheme that may affect payments from your employer on your vehicle expenses.

Relevant motoring expenditures

Relevant motoring expenditures (RME) 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

Qualifying Amount

 

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 National Insurance 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.

 

That's it for our guide on the basics of reimbursing mileage for employees in the UK. We hope we've been of assistance :)

Happy tracking! 

 

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This material has been prepared for general informational purposes only and is correct at the time of publishing. It should not be taken as professional advice from Driversnote. We recommend seeking independent legal, taxation, or financial advice from a professional to check how this information relates to your own circumstances.