Claiming Car Mileage Allowance: What You Need to Know

Claiming mileage allowance is one of the most common questions for both employees and self-employed individuals. If you use your personal vehicle for business travel, it’s important to understand how much you can claim and the correct method for doing so. 

In this guide, we explain everything you need to know about mileage allowances, how to calculate claims, and how to stay compliant with HMRC rules. 

How Much Can You Claim for Business Mileage? 

If you use your own car for business journeys, you can claim a tax-free mileage allowance based on HMRC’s approved rates. These rates are currently: 

• 45p per mile for the first 10,000 business miles in a tax year 

• 25p per mile for any additional miles above 10,000 

These rates are designed to cover the running costs of your vehicle, including fuel, insurance, servicing, and wear and tear. 

If your employer reimburses you at a lower rate than HMRC’s approved rate, you may be able to claim tax relief on the difference. 

Car Sharing for Business Travel 

If you travel with colleagues from the same business, the driver can claim an additional 5p per mile for each eligible passenger. This applies only if the passengers are also employees or officers of the same business. 

For instance, if you drive with two colleagues to a business event, you could claim 55p per mile, that’s 45p for the standard rate, plus 5p each for two passengers. 

What Are the HMRC Mileage Allowance Rates? 

The HMRC-approved mileage rates apply to employees using their personal vehicles for business purposes. You cannot claim additional running costs (such as MOTs or repairs) separately, as these are already factored into the mileage rate. 

If you use a company car, you can only claim tax relief on fuel or electricity used for business travel, and accurate mileage and fuel logs must be kept. 

Employers may reimburse mileage through Mileage Allowance Payments (MAPs). If the payments are below the approved rate, the employee may claim the difference as tax relief. 

Mileage Allowance for the Self-Employed 

If you’re self-employed, you can choose to use simplified expenses, which allow you to claim: 

• 45p per mile for the first 10,000 miles 

• 25p per mile for any miles beyond this 

These rates apply to cars and vans but not motorcycles or bicycles (which have separate rates). 

You cannot use simplified mileage if you’ve already claimed capital allowances on the same vehicle. In that case, you must calculate your actual costs and claim a proportion based on business use. 

How to Claim Mileage Allowance 

If you’re self-employed and using simplified expenses, simply multiply your business mileage by the relevant rate and include this figure in your Self-Assessment tax return. 

If you do not use the simplified method, you’ll need to work out the total cost of running the vehicle (including insurance, fuel, tax, and maintenance), and then claim a percentage based on the proportion of miles driven for business. 

For Employees: 

Calculate your business mileage and compare it to any reimbursement from your employer. 

Example: 

• Total business miles: 11,000 

• Claim: 10,000 x 45p = £4,500 

• Remaining 1,000 x 25p = £250 

• Total allowance: £4,750 

• Employer reimbursed: £2,000 

• Tax relief claim: £4,750 – £2,000 = £2,750 

• Tax refund (basic rate): £550 (at 20%) 

This calculation can vary depending on your tax band, so it’s worth confirming with an accountant. 

Can You Claim VAT on Mileage? 

You can only claim VAT on the fuel portion of the mileage allowance, not the full amount. 

HMRC publishes Advisory Fuel Rates (AFRs) which indicate the fuel portion of the mileage rate. To calculate the VAT you can reclaim: 

1. Identify the AFR that applies to your vehicle 

2. Multiply the AFR by 0.166 (which accounts for 20% VAT within the gross rate) 

Example: 

If the AFR is 13p per mile for your car, then: 

13p x 0.166 = approximately 2.16p per mile VAT reclaimable 

To support your VAT claim, you must keep VAT receipts showing that you’ve paid for sufficient fuel to cover the mileage claimed. 

Claiming a Van as a Business Expense 

If you’re self-employed and use a van solely for business purposes, the cost of purchasing it may qualify as a capital allowance rather than an allowable expense. 

• Under traditional accounting, you claim the purchase cost as a capital allowance 

• Under the cash basis, you can still use capital allowances, but fuel, insurance, servicing, and other running costs are claimed as regular business expenses 

Leased vans may also qualify for deduction depending on the lease type and business use. 

Is There a Simpler Way to Track and Claim Mileage? 

Tracking mileage manually can be time-consuming, especially if you drive frequently for work. To make things easier, consider keeping a dedicated logbook or using a mileage-tracking app that records business journeys accurately. 

Accurate mileage records should include: 

• Date of journey 

• Start and end location 

• Number of miles 

• Purpose of the trip 

This not only helps when claiming tax relief but also serves as evidence should HMRC request a review. 

Unsure how to claim your mileage allowance correctly? 
Our expert accountants can help you maximise your tax relief and stay compliant with HMRC rules.  

Contact us today for tailored advice or a free initial consultation.