Mileage Expenses UK: A 2026 Guide to Rates, Claims, and Relief

Claiming tax relief for business travel in a personal vehicle is a common but highly regulated area. Whether you are advising an employee, a sole trader, or a landlord, understanding the correct framework is essential for compliance. Different schemes apply depending on the taxpayer’s status, but all rely on the same fundamental principles of approved rates and meticulous record-keeping.

This guide details the rules for claiming mileage expenses for employees, the self-employed, and unincorporated property businesses.

For Employees: The AMAPs Scheme

When an employee uses their own vehicle for business travel, they can receive tax-free payments from their employer under the Approved Mileage Allowance Payments (AMAPs) scheme. This statutory system, governed by the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), provides a simple, standard way to reimburse motoring costs.

Approved Mileage Rates

The tax-free amount an employer can pay is calculated by multiplying the employee’s business mileage by the statutory rate for the vehicle. Any payment up to this “approved amount” is exempt from tax.

The rates set out in section 230 of ITEPA 2003 are:

The 10,000-mile threshold applies to the total business mileage in a tax year for that employment. The rates are intended to cover the total costs of running the vehicle, including fuel, insurance, and depreciation.

What if the Employer Pays Less Than the Approved Rate?

If an employer pays less than the approved AMAP rate, or pays nothing at all, the employee can claim tax relief on the difference. This is known as Mileage Allowance Relief (MAR).

Under section 231 of ITEPA 2003, the amount of relief an employee can claim is the approved amount (mileage x statutory rate) less any mileage allowance payments received from the employer. This relief is given as a deduction from their employment earnings, reducing their overall tax liability.

What if the Employer Pays More Than the Approved Rate?

If an employer pays a mileage allowance that exceeds the approved AMAP rate, the excess amount is treated as taxable earnings.

For the Self-Employed and Partnerships: Simplified Expenses

Sole traders and business partnerships (excluding those with a corporate partner) can choose to use a simplified, flat-rate basis to calculate their vehicle expenses instead of tracking every single cost.

Simplified Mileage Rates

The rates for the simplified expenses scheme are identical to the AMAP rates for employees:

What the Mileage Rate Covers

The flat rate is designed to be an all-inclusive figure covering the total cost of owning and running the vehicle. This includes:

• Fuel and oil
• Servicing, repairs, and MOT
• Insurance and vehicle excise duty
• Depreciation (wear and tear).

Because the rate includes an element for depreciation, a business cannot use the simplified mileage rate for a vehicle if it has ever claimed capital allowances on it. You must switch back to calculating actual costs if you claim capital allowances.

The rate does not cover incidental costs of a journey, such as tolls, congestion charges, and parking fees. You can claim these expenses separately, provided they are incurred wholly and exclusively for business purposes.

For Landlords: Unincorporated Property Businesses

Since April 2017, unincorporated property businesses have been able to use the same fixed mileage rates to calculate their vehicle expenses. This simplifies record keeping for landlords who use their personal vehicles for property-related business travel.

The same rules and restrictions that apply to trading businesses also apply here. For example, a landlord cannot use the mileage rates for a vehicle if they have previously claimed capital allowances on it, subject to certain transitional arrangements.

Record Keeping: The Essential Compliance Step

Regardless of which scheme you use, you must maintain a contemporaneous and accurate record of all business journeys. This is critical to support any claim. An inadequate log could lead to HMRC challenging the deduction.

A typical mileage log should include:

• The date of each journey.
• The start and end points.
• The purpose of the journey.
• The number of miles travelled.

For VAT-registered businesses that reimburse employees, you must also keep records of the mileage, vehicle cylinder capacity, and the amount of input tax claimed on the fuel element of the allowance.

Reclaiming VAT on Mileage Expenses

A VAT-registered business can reclaim the input VAT on the fuel portion of mileage allowances paid to employees for business travel. To do this, you must retain VAT receipts for fuel to cover the amount being claimed. HMRC publishes Advisory Fuel Rates which can be used to determine the fuel element of the 45p/25p per mile payment.

For detailed guidance on the AMAPs scheme and Mileage Allowance Relief, refer to HMRC’s Employment Income Manual at EIM31200 onwards. For the simplified expenses scheme for businesses, see the Business Income Manual at BIM75005..