Mileage allowance
Mileage allowance is the tax-free amount a company can pay a director or employee for business travel in their own car: 45p a mile for the first 10,000 business miles in the tax year and 25p a mile after that.
Also known as: AMAP, approved mileage allowance payments
How it works
Where you use your own car for company business, the company can reimburse you at HMRC's approved rates with no tax or National Insurance on either side. The rates are 45p a mile for the first 10,000 business miles in a tax year and 25p a mile thereafter, and 24p a mile for motorcycles and 20p for bicycles. The payment is deductible for the company and tax free for you.
Pay more than the approved rate and the excess is taxable earnings. Pay less, or nothing at all, and you can claim tax relief personally on the shortfall through self assessment or a P87 claim. A passenger who is also travelling on company business can be paid an extra 5p a mile, tax free.
Business mileage does not include ordinary commuting between home and a permanent workplace. For many single-director companies whose registered office is their home, most client visits do count, but the position depends on where the permanent workplace actually is.
If the company owns or leases the car instead, this regime does not apply. The car becomes a benefit in kind and fuel is handled through advisory fuel rates, which is a completely different calculation and usually more expensive unless the car is electric.
Worked example (2026/27)
12,000 business miles in your own car
| First 10,000 miles at 45p a mile | £4,500 |
|---|---|
| Next 2,000 miles at 25p a mile | £500 |
| Tax-free reimbursement | £5,000 |
| Corporation tax saved at 19% | £950 |
Who this affects
- Directors using a personal car for client visits, suppliers and site work
- Companies deciding between a company car and mileage reimbursement
- Employees paid below the approved rate, who can claim the shortfall personally
- Anyone whose home is the company's registered office and whose commute rules are unclear
Common mistakes
- Claiming for home-to-office commuting
- Keeping no mileage log, so the claim cannot be evidenced in an enquiry
- Paying above the approved rate without reporting the excess
- Running both a company car and mileage claims for the same journeys
Frequently asked questions
What is the HMRC mileage rate?
45p a mile for the first 10,000 business miles in a tax year and 25p a mile for miles after that, for cars and vans.
Does the 10,000 mile limit reset each year?
Yes, it resets at the start of each tax year on 6 April and applies per employee, not per vehicle.
What records do I need?
A log of each business journey with the date, destination, purpose and miles. HMRC routinely asks for this and a round annual figure is rarely accepted.
Can I claim mileage in a company car?
No. Company car fuel is dealt with through advisory fuel rates and the benefit in kind rules instead of approved mileage payments.
Related terms
Work this out
Related reading
Reviewed by Waqas Sagar ACA FCCA FMAAT · Last reviewed 13 September 2026 · Figures for 2026/27 · About our practice
Official sources
Not sure how this applies to your company? Get a fixed-fee quote.