Mileage allowance relief: Everything you need to know

As an employee, you can claim tax relief on a range of work-related expenses. What you can claim, though, depends on your company’s policy.

Typically, companies will reimburse employees for purchases that support them in their roles, but reimbursements will only be made on expenses solely for business purposes. Expenses that have an element of personal use can only be partially reimbursed. If you claim an expense that isn’t for business purposes, this expense becomes a benefit and will therefore be taxable.

Some examples of business expenses include travel, accommodation, food costs for business trips, corporate entertainment, essential stationery not provided by your company, and business phone calls from a personal mobile or landline.

One of the most common employee expenses is travel, including using your own vehicle for work purposes. Reimbursements for this type of expense are known as “mileage allowance payments” or “MAPs”. If your employer doesn’t offer these or only makes partial payments, you may be able to claim mileage allowance relief from the government. Like most forms of tax relief, there are complicated rules surrounding this, which is why we thought it would be helpful to put together this guide. In it, we’ll explain everything you need to know on the topic, including precisely what mileage allowance relief is, who is eligible to claim it, and how much you can claim.

If you’ve used your own vehicle for business purposes and your employer doesn’t reimburse you or only makes partial payments for fuel, oil, insurance, repairs, servicing, MOT, and road tax expenses, you may be able to claim mileage allowance relief from HMRC.

Depending on your other claims, if you’re self-employed, you can also claim mileage allowance relief in your Self Assessment tax return at the end of each tax year.

What are the Approved Mileage Allowance Payment rates?

HMRC sets Approved Mileage Allowance Payment (AMAP) rates each tax year. This means employers can reimburse employees up to a certain amount without declaring the payments for tax purposes.

These rates differ depending on your vehicle type and how many miles you drive.

The rates for 2022 are the same as they have been for the past 12 years and are as follows:

Note that the figures given in this table are advisory, and employers are not obliged to pay MAPs at these rates. If your employer pays you more than the AMAP rate, it is considered extra earnings and will therefore be taxable and subject to extra National Insurance contributions. If they pay you less than the AMAP rate, you may be eligible for mileage allowance relief on the difference.

Am I eligible to claim mileage allowance relief?

If you use your personal car, van, or motorcycle for business purposes, you may be able to claim mileage allowance relief at the AMAP rates. 

Whether or not you are eligible depends on your circumstances.

You may be eligible for mileage allowance relief if:

• Your employer reimburses you with mileage allowance payments (MAPs) but not at the full approved mileage rate. In this case, you can claim the difference from HMRC.
• You are self-employed and use your personal vehicle for work purposes.

You will not be eligible for mileage allowance relief if:

• Your employer fully reimburses you with MAPs.
• You have been paid more than the approved amount of MAP. In this case, your business mileage will be taxed through PAYE.
• You earn less than the Personal Allowance (which is £12,570 for the 2022/23 tax year), meaning you do not pay Income Tax and cannot, therefore, claim relief.

How to claim mileage allowance relief

There are two ways to claim mileage allowance relief. The way you claim depends on whether you are employed or self-employed.

Self-employed people

As mentioned, if you are self-employed, you can claim your MAPs from HMRC when you do your Self Assessment return at the end of each tax year.

Employed people

If your employer doesn’t offer MAPs or only pays you partial MAPs, and you’re claiming less than £2,500, you will need to fill out form P87. 

If your employer doesn’t offer MAPs or only pays you partial MAPs, and you claim more than £2,500 in expenses, you must file a Self Assessment tax return.

What records do I need to keep?

To claim MAPs from your employer or mileage allowance relief from HMRC, you will need to provide accurate records of your business mileage.

Your employer or HMRC will need the following information:

• The dates of each business trip you make
• The start and end addresses for each trip
• The distance of each trip

If you receive partial MAPs from your employer, HMRC will also need to know how much you’ve received. 

When keeping records of your business trips, you might find it helpful to download a mileage-tracking app to track your expenses automatically. Not only will this save you time, but it will also ensure accuracy. Alternatively, you can keep manual records. Just remember to make a note of dates, locations, the purpose of your trip, and how many miles you’ve covered. It’s a good idea to reset your mileage counter before each business trip and use a separate credit or debit card to track the money you spend on business fuel. 

Remember to keep all receipts as proof of payments. If you don’t get a receipt, write down who you paid, how much you spent, and the date of the transaction. If you paid by credit or debit card, a bank statement should prove the expense sufficiently.

While employers do not have to declare every single item of expenditure in order to reimburse you, they must have some procedures in place to verify your spending. This means that if you cannot provide records of what you have spent, they may not be able to reimburse you.

What if I drive a company car?

Mileage allowance relief only applies to personal vehicles used for work purposes. If you drive a company car, you can still claim tax relief via Self Assessment or form P87, but under a different scheme. Like claiming mileage allowance relief, you will still need to keep records of your expenses. However, the rates are different.

What counts as a business journey?

Unfortunately, you can’t claim mileage allowance relief for all types of business journeys. 

Journeys that aren’t eligible for mileage allowance relief include:

• Travelling between your home and your permanent place of work
• Personal trips from your workplace
• Personal trips during which you run business errands

However, some instances when you can claim mileage allowance relief are:

• Travelling to and from a temporary place of work
• Meeting a client to discuss business
• Travelling between your usual place of work and another job site for business purposes

Examples

Here are some scenarios to help you work out what your entitlement to mileage allowance relief might be:

You drive 10,000 miles in your car for work purposes and your employer doesn’t offer MAPs

You would calculate the total mileage allowance relief you can claim as follows:

10,000 miles x 45p = £4,500

You drive 20,000 miles in your car for work purposes and your employer doesn’t offer MAPs

You would calculate the total mileage allowance relief you can claim as follows:

10,000 miles x 45p = £4,500

10,000 miles x 25p = £2,500

£4,500 + £2,500 = £7,000

You drive 15,000 miles in your car for work purposes and your employer offers you the full rate of MAPs

This is calculated as follows:

10,000 miles x 45p = £4,500 

5,000 miles x 25p = £1,250

£4,500 + £1,250 = £5,750

In this case, you wouldn’t be entitled to mileage allowance relief because your employer has fully reimbursed you.

You drive 10,000 miles in your car for work purposes and your employer offers you MAPs at a rate of 15p per mile

You can only claim mileage allowance relief on the amount not covered by your employer. This is calculated as follows:

45p – 15p = 30p

10,000 miles x 30p = £3,000

You drive 15,000 miles in your car for work purposes and your employer offers you MAPs at a rate of 20p per mile

Again, you can only claim mileage allowance relief on the amount not covered by your employer. This can be calculated as follows:

45p – 20p = 25p

10,000 miles x 25p = £2,500

25p – 20p = 5p

5,000 miles x 5p = £250

£2,500 + £250 = £2,750

Summary

Reimbursements for expenses you’ve incurred while using your personal vehicle for business purposes are known as “mileage allowance payments” or “MAPs”. If your employer doesn’t offer these or only makes partial payments, you may be able to claim “mileage allowance relief”. If you are self-employed, you may be able to claim mileage allowance relief via Self Assessment.

HMRC sets Approved Mileage Allowance Payment (AMAP) rates each tax year. This means employers can reimburse employees up to a certain amount without declaring the payments for tax purposes. These rates differ depending on your vehicle type and how many miles you drive.

You can claim mileage allowance relief by either filling out form P87 or a Self Assessment tax return. You will need to provide the dates of each business trip you make, the start and end addresses for each trip, the distance of each trip and details of any partial MAPs you’ve received from your employer. 

If you drive a company car, you can still claim tax relief via Self Assessment or form P87, but under a different scheme.