Contemporary UK brick commercial business park office building on an overcast morning
HMRC requires contemporaneous travel logs with dates, postcodes, and business reasons to support tax-free mileage claims.

HMRC business mileage rules tell UK small firms how to repay staff for work trips in their own personal cars. This system lets company owners cover essential motoring costs without triggering unexpected tax bills. The statutory framework uses fixed pence-per-mile rates known as Approved Mileage Allowance Payments (AMAP). These figures cover fuel, car wear, road tax, insurance, and routine repairs. Payments made at or below these statutory limits carry zero income tax and zero National Insurance.

This guide explains how UK business owners manage statutory mileage rates and spot valid trips under tax law. It shows where daily commuting falls foul of statutory relief rules. You will see how the 24-month workplace rule works during extended commercial projects. We also explain how staff claim tax relief on unpaid mileage, and how to keep clear records for HMRC compliance checks.

HMRC business mileage allowance

The Approved Mileage Allowance Payments scheme sets statutory rates under Section 229 of ITEPA 2003. Employers can pay up to these rates without completing extra benefit forms. You do not have to report these qualifying payments on Form P11D. You do not deduct PAYE tax or Class 1 National Insurance from the money.

Rates depend on the type of vehicle. Cars and goods vans share an annual limit. The rate depends on total work miles driven in the tax year:

Vehicle Category First 10,000 Business Miles Above 10,000 Business Miles Passenger Top-Up (Per Colleague)
Cars and goods vans 45p per mile 25p per mile +5p per mile
Motorcycles 24p per mile 24p per mile Nil
Bicycles 20p per mile 20p per mile Nil

The 10,000-mile limit applies across the tax year. That tax year runs from 6 April to 5 April. It does not reset each month. It does not reset for separate cars. If a worker uses two personal cars for one job, all miles pool toward one cap.

Electric cars owned by staff use these same statutory rates. HMRC treats petrol, diesel, hybrid, and electric cars the same way. By contrast, company-owned cars follow separate advisory fuel rates.

Firms can pay a tax-free passenger top-up of 5p per mile. The driver must carry a fellow employee on a business journey. Both staff members must travel on genuine work tasks. If two colleagues visit a client together, the driver gets the extra 5p per mile tax-free.

What is classed as business mileage HMRC

Under tax law, business travel covers trips workers must take for their duties. It also includes journeys to a temporary workplace. The trip must be needed for the job itself. Personal choice does not count.

Valid work travel includes trips between two company sites. It covers travel to see clients, buyers, and suppliers. For mobile trades with no fixed office, all travel between job sites during the day qualifies.

Daily commuting never qualifies for tax relief. HMRC defines commuting as travel between home and a permanent workplace. Checking emails on a train does not make the trip deductible. Taking calls while driving does not change the trip. Dropping off a parcel on the way home does not count either.

If a worker takes a detour on a work trip, exclude those extra miles. For example, an employee drives 40 miles to a customer site. They take a 10-mile detour to visit friends. Only the direct 40-mile route qualifies for tax-free repayment.

HMRC business mileage 24 month rule

The line between temporary and permanent sites follows the 24-month rule. A location counts as a temporary workplace if an employee attends it for a limited task or a set time.

A location stops being a temporary workplace as soon as both conditions below apply together:

This rule triggers on expectation, not after 24 months have passed. Suppose an engineer works at a client office for an expected 18 months, where travel counts as allowable work travel. But at month 10, the client extends the contract to 30 months. The site becomes a permanent workplace right away. Travel pay becomes taxable from the date of that extension.

Claiming business mileage HMRC

When an employer pays less than the statutory rate, staff still get tax relief. Under tax rules, workers can claim Mileage Allowance Relief directly from HMRC.

Mileage Allowance Relief cuts taxable job income. It covers the gap between the approved sum and what the firm paid:

Mileage Allowance Relief = Approved AMAP Allowance − Employer Reimbursement Paid

Worked tax relief example: An operations manager drives 8,000 work miles in a personal car during the tax year. The firm pays 30p per mile under internal expense policy.

The statutory allowance is 8,000 miles × 45p = £3,600.00. The firm pays 8,000 miles × 30p = £2,400.00. The allowable gap is £1,200.00. The worker claims £1,200.00 in tax relief on their annual Self Assessment tax return or via official Form P87.

For a basic rate (20 percent) taxpayer, this claim saves £240.00 in income tax (£1,200.00 × 20 percent). For a higher rate (40 percent) taxpayer, it saves £480.00 in income tax (£1,200.00 × 40 percent). This relief cuts income tax only, and it does not recover National Insurance contributions on the shortfall.

If a firm pays more than the statutory rate, such as 60p per mile, the extra 15p is taxable pay. The business must run that extra sum through payroll. It must deduct PAYE tax and National Insurance on the excess.

Audit-ready mileage log checklist

HMRC officers check travel claims during payroll reviews. Under tax penalty rules, unbacked claims can be treated as taxable pay. This triggers backdated tax bills, employer charges, interest, and fines.

Rough guesses fail official tax checks. To protect your firm during an audit, every mileage log must record five key details:

Required Field Compliance Standard Non-Compliant Example (Disallowed)
1. Date of Journey Exact calendar day of travel "Various dates in October"
2. Start and End Locations Specific addresses or full postal codes "London to Birmingham"
3. Business Purpose Specific meeting, client name, or job duty "Business meeting" or "Client visit"
4. Distance Traveled Recorded odometer units or calibrated map miles "Estimated 60 miles round trip"
5. Passenger Details Names of colleague passengers for 5p top-up claims "Carried colleague" (no name logged)

Employees should log each trip near the time of travel using logbooks or apps. Rebuilding a whole year of trips from diary notes in January rarely passes an HMRC check.

VAT recovery and fuel scale charges

Many firms try to reclaim 20 percent VAT on the full 45p allowance. This is an error. Statutory mileage rates sit outside the scope of VAT because they are employee reimbursements, not commercial sales.

Reclaiming VAT on business expenses follows strict HMRC documentation rules. Review our guide on VAT bad debt relief rules UK to maintain full audit compliance across your finance records.

If your firm provides company cars, also check our guide on directors loan account s455 tax and company car rules to prevent surprise liabilities.

Record retention and policy governance

Small business owners must keep travel logs, expense claims, and fuel bills for at least six years. Check our guide on how long to keep business records to meet statutory rules.

Set clear mileage caps inside your written small business expense approval policy. Track vehicle costs using our one-hour budget plan. When setting perks for directors, check the rules for trivial benefit rules for directors.

Review official rules via the GOV.UK business travel mileage rules and the HMRC Employment Income Manual EIM32080. This guide provides practical facts and does not replace tailored advice from an accountant.