What Is HMRC Mileage Allowance And How Does It Work?

Are you required (directly or indirectly) to make business trips in service of your career? Many people are.

Using their own personal transport, they need to cross large distances to visit sites, reach meetings, and even move goods — and they can rack up worrying fuel costs along the way (there are ways to save fuel, of course, but they only go so far). If they’re employees, they can be compensated by their employers, but it doesn’t always happen. Sometimes they’re left to finance their trips.

Whether you’re an employee of a company that won’t pay for the fuel you use on business trips, a self-employed professional, or the head of your own company, you have the option of using the HMRC mileage allowance to recoup some of your costs. But what does that actually entail?

In this post, we’re going to answer the core questions about the HMRC mileage allowance, detailing what it involves, how it works, and how you can use it. Let’s get started.

What is HMRC mileage allowance?

Very simply, HMRC mileage allowance lets you claim a reduction of your taxable income to partially offset what you’ve spent on certain travel costs for business trips and not had reimbursed by an employer. It applies only to distance covered during the relevant tax year, and only to travel using vehicles not owned by your employer (so no company cars).

With mileage allowance, you’re required to calculate the amount to claim. For this, you must use the number of miles travelled for business and the type — or types — of vehicle used along the way. You can then submit it to HMRC for consideration and approval if everything checks out.

What is mileage allowance meant to cover?

The purpose of mileage allowance is to cover the expenses involved in using, fueling and maintaining personal vehicles for business-required journeys. Keep in mind that it’s a simplified method intended to make tax assessment easier — the alternative is to carefully tally relevant capital allowances such as servicing costs, car insurance charges, and fuel payments.

Note that the idea of mileage allowance is not to cover anything other than journey-related costs accrued during your business trips. The relief isn’t meant for tolls, congestion charges, parking fees, or anything along those lines: though you don’t need to give this any thought when using the conventional mileage allowance calculation.

When can you claim mileage allowance?

If you’ve been required to cover distance for your company using a private vehicle during the current tax year — and you haven’t been reimbursed up to the standard AMAP (Approved Mileage Allowance Payments) rates by the end of it — then you can make a mileage claim.

Due to its simplicity, the only firm restriction on mileage allowance calculation is how you determine the number of miles to claim. The main limitation concerns commuting: if you have a permanent workplace that you travel to on a regular basis, you cannot claim for that travel. You also cannot claim for similar trips, such as driving to and from a location very close to that area.

There is a rare exception to this: if you’re in a permanent position (i.e. not on a temporary contract) and commuting to a temporary working site (you won’t be working there for longer than 24 months), then you can claim for those miles. If you’re unsure, get some expert advice.

Otherwise, you can claim mileage allowance for any instance of your business requiring you to make non-commuting journeys to fulfil your duties. For instance, if you have to drive to a conference or to a client’s office (or if making certain journeys is a core part of your job, as is the case for truck drivers or chauffeurs), then all the miles covered will count — provided, at least, you don’t take huge diversions to pursue non-business purposes.

Who can claim mileage allowance?

Anyone with business-related fuel costs fitting the identified criteria who hasn’t had them fully covered by an employer is entitled to make a mileage allowance claim. It doesn’t matter if they’re self-employed or a company employee — just that they had to cover them for business and were using their personal vehicle (or vehicles) for the claimed miles.

“Vehicle” is necessary here because mileage allowance doesn’t simply cover cars. Standard rates exist for cars, vans, motorcycles, and even bicycles — so if you ride your own bicycle for some kind of full-time delivery job, you can claim on the miles covered.

Note, though, that you cannot claim mileage allowance for a given vehicle if you’ve already taken the capital allowance route. Once you’ve chosen a calculation method (likely based on what’s most convenient and most impactful in your case), you need to stick with it for as long as you’re claiming for that particular vehicle.

What are the mileage allowance rates?

HMRC provides the following AMAP rates that you can use to calculate your mileage claim:

These basic rates apply to miles spent with you as the driver (or rider) and none of your colleagues joining you. In the event that you’re tasked with transporting two or more colleagues on a business trip, you can claim an additional 5p per mile for each one.

How can you claim mileage allowance relief?

The method for calculating mileage allowance relief is very simple and far easier than the complex capital allowance route. Using the restrictions we’ve set out, tally the number of miles you’ve covered on business journeys using the vehicle in question, also factoring in any miles covered while transporting multiple colleagues.

Once you have the total, multiply anything up to 10,000 miles by the appropriate rate from the AMAP table, and do the same for any additional miles. Then, when the tax year wraps up, claim that figure as your mileage allowance.

What if you have a company car?

If you’ve been granted a company car by your employer and have been using it to make business journeys, you can’t claim mileage allowance, but you can claim tax relief on your fuel costs if your employer isn’t compensating you for them in line with the Advisory Fuel Rates (AFR) — or the Advisory Electricity Rate (AER) if your company car is electric.

Fuel card mileage makes life easier if you use a grey fleet

We explained earlier that the HMRC mileage allowance only applies to journeys made with vehicles that aren’t owned by an employer. This means many fleet businesses won’t be directly impacted by the mileage allowance, as they own all the vehicles used by their drivers.

However, businesses that operate grey fleets are affected by the allowance.

Grey fleets are where employees use their own vehicles for work purposes. This could mean taking their cars to regular client meetings, driving their vans to sites or using their lorries to deliver goods.

If you use grey fleets then your drivers are entitled to claim a reduction of their taxable income for the distances they’ve travelled for work trips with their own vehicles — if your company hasn’t reimbursed them for the cost of these journeys.

This means employees need to go through the usual process of calculating the amount they’re entitled to claim, then submit their documentation to seek approval. It’s a process that’s made easier for your employees (or your staff who deal with these claims on their behalf) if your company uses fuel cards.

The reason fuel cards make this process simpler is that they create electronic records of all the miles travelled by your drivers, along with their diesel and petrol transactions.

These records produce detailed reports (and HMRC-approved invoices) that reduce the admin associated with submitting a mileage claim to HMRC — for example, your drivers redeeming paper receipts from journey-related purchases and working out for themselves how many miles they’ve travelled.

With all this in mind, if your business operates a grey fleet then it’s sensible for you to think about using fuel cards. You can find the right card for your company by using iCompario’s “Compare fuel card compare” tool. Just enter the number and type of vehicles your company has and the fuel stations it uses. We’ll then give you a list of options and you can pick the best one(s).

And if you want to add another layer of managerial efficiency to your business then you can combine your fuel card with vehicle tracking software.

Vehicle tracking helps you to manage your fleet by providing you with data on driver behaviour. It tells you if they’re breaking too hard and driving too fast, two things that can lead to accidents.

This means that vehicle tracking gives you the information you need to introduce any necessary behavioural changes in your drivers, reducing the risk of them causing accidents while driving on behalf of your business and subjecting your company to damaging insurance claims or legal challenges.

You can choose your vehicle tracking software by using our “Compare vehicle tracking systems” tool.

Get quotes now for fuel cards and vehicle tracking solutions

About the author

This article was written by one of the experts from iCompario, a leading fuel card comparison site. The team at iCompario has a long background in a wide range of areas that offer helpful insights to UK businesses, with knowledge in finance, research, insurance among their areas of experience.

Sources and further information

• Travel – mileage and fuel rates and allowances
• Simplified expenses if you’re self-employed
• What travel expenses can I claim?
• Advisory fuel rates
• Expenses and benefits: business travel mileage for employees’ own vehicles
• Motoring taxation in the United Kingdom