Using Your Own Vehicle for Work: HMRC Mileage Rates Explained

Employees who use their own vehicle for business journeys may be entitled to receive mileage payments from their employer.

Provided these payments remain within HMRC’s approved limits, they can normally be made without Income Tax or National Insurance becoming due. However, different rules apply when an employer pays more or less than the approved amount.

With the main mileage rate increasing from 6th April 2026, both employers and employees should check that they are using the correct figures.

What are the HMRC-approved mileage rates?

For the 2026/27 tax year, employers can pay the following approved mileage allowance payments:

The rate for cars and vans increased from 45p to 55p for the first 10,000 business miles from 6 April 2026. The 25p rate for mileage above this threshold remains unchanged.

There is no 10,000-mile reduction for motorcycles or bicycles. Their respective rates apply to every qualifying business mile travelled.

What does the mileage payment cover?

The approved mileage rate is intended to contribute towards the overall cost of using a privately owned vehicle for work.

This includes costs such as:

• Fuel or electricity
• Insurance
• Vehicle servicing
• Repairs and maintenance
• Depreciation and general wear and tear

The same car and van rates apply regardless of whether the employee drives a petrol, diesel, hybrid or fully electric vehicle.

Employees cannot normally claim their actual fuel, repair or servicing costs in addition to the approved mileage rate.

What counts as business mileage?

The mileage rules apply when an employee uses their own vehicle for a qualifying business journey.

This could include travelling:

• To visit a client
• Between different business locations
• To attend a meeting, training course or event
• To a temporary workplace
• To carry out duties away from the employee’s normal workplace

Ordinary travel between an employee’s home and their permanent workplace is generally treated as commuting rather than business travel. It does not normally qualify for mileage payments or tax relief.

Can parking and toll charges be reimbursed separately?

Certain expenses incurred as part of a qualifying business journey can be reimbursed separately from the mileage payment.

These can include:

• Parking charges
• Road and bridge tolls
• Congestion charges
• Clean air zone charges

Where the costs relate wholly to qualifying business travel and the appropriate records are retained, they can generally be reimbursed without tax or National Insurance becoming due.

Parking fines, speeding fines and other penalties are treated differently. Where an employer pays or reimburses a fine that is the employee’s personal liability, tax and National Insurance consequences can arise.

Carrying another employee as a passenger

An additional payment of up to 5p per mile can be made when an employee carries a colleague in their own car or van.

The passenger must also be travelling on a qualifying business journey. The additional payment can be made for each eligible passenger being carried.

For example, an employee carrying two colleagues on a 50-mile business journey could receive an additional £5:

50 miles × 5p × two passengers = £5

The passenger payment must be made specifically because the employee carried their colleagues. It is separate from the standard mileage allowance.

What happens if an employer pays more than the approved rate?

Employers are free to set their own mileage reimbursement rates. However, any amount paid above HMRC’s approved limit may become taxable.

For Income Tax purposes, the excess will generally need to be reported on form P11D or taxed through payroll where the employer has registered to payroll the benefit.

National Insurance is calculated under a separate system. From 6 April 2026, the National Insurance qualifying amount for cars and vans is based on 55p for every business mile, rather than reducing to 25p once the employee exceeds 10,000 miles.

Any relevant motoring payment above the National Insurance qualifying amount must be added to the employee’s earnings when calculating Class 1 National Insurance through payroll.

Because the Income Tax and National Insurance calculations are not identical, employers should take care when an employee travels more than 10,000 business miles during the tax year.

What happens if the employer pays less?

An employer does not have to reimburse employees at the full HMRC-approved rate.

However, where an employee receives less than the approved amount, they may be able to claim Mileage Allowance Relief on the difference.

For example, an employee travels 1,000 qualifying business miles during the 2026/27 tax year and receives 40p per mile from their employer.

The calculation would be:

• HMRC-approved amount: 1,000 miles × 55p = £550
• Amount received from the employer: 1,000 miles × 40p = £400
• Amount qualifying for Mileage Allowance Relief: £150

The employee does not receive the full £150 from HMRC. Instead, tax relief is provided on that amount at their relevant rate of Income Tax.

A basic-rate taxpayer receiving relief at 20%, for example, could reduce their tax bill by £30.

Employees may also be able to claim relief if their employer does not provide any mileage reimbursement.

There is no equivalent Mileage Allowance Relief for the additional 5p passenger payment. If the employer pays less than 5p, or pays nothing, the employee cannot claim tax relief on the shortfall.

How can employees claim Mileage Allowance Relief?

Mileage Allowance Relief can normally be claimed through HMRC’s online job expenses service.

Employees who already complete a Self Assessment tax return should usually include the claim within their return.

Claims should be based only on qualifying business journeys and must take account of any mileage payments already received from the employer.

Why accurate mileage records matter

Employers and employees should maintain clear evidence supporting every mileage claim.

Records should include:

• The date of the journey
• The starting point and destination
• The total number of business miles travelled
• The business reason for the journey
• Details of any eligible passengers
• The amount reimbursed by the employer
• Receipts for parking, tolls or congestion charges

These records can help demonstrate that payments meet the conditions for tax and National Insurance exemption if HMRC asks for evidence. HMRC specifically requires employers to retain adequate records relating to the mileage travelled.

Mileage payments at a glance

From 6th April 2026, employees using their own car or van can receive up to 55p per mile for their first 10,000 qualifying business miles without an Income Tax charge.

The rate then falls to 25p per mile for Income Tax purposes, while separate National Insurance rules continue to use 55p for every qualifying business mile.

Employees carrying colleagues may also receive an additional 5p per passenger for each qualifying business mile.

Where an employer pays below the approved amount, the employee may be able to claim tax relief on the difference. Where the employer pays more, reporting, Income Tax and National Insurance obligations may arise.

Mileage calculations can become more complicated where employees receive car allowances, travel high mileages or have different reimbursement arrangements. If you need support reviewing your business mileage policy or understanding what can be claimed, please contact our team.