What is mileage allowance?
If your employees travel for work without a designated fuel expense card, you may be asking how to reimburse them for the travel costs incurred.
Let’s take a look at a few key HMRC guidelines and see how calculating mileage allowance can be made simple — ensuring compliance and accurate reimbursement each tax year.
HMRC defines Mileage Allowance Payments (MAPs) as the payments employers make to employees who use their personal vehicles for business travel.
If your employee uses a personal vehicle for business purposes, they can claim back a certain amount of what has been spent, tax-free. HMRC sets flat mileage rates depending on the type of vehicle used and the distance an employee travels in the tax year. These rates are known as Approved Mileage Allowance Payment rates (AMAPs). If an employer pays more than the HMRC AMAP rates, the excess is treated as taxable income.
To qualify for mileage reimbursement, an employee’s journey must be undertaken exclusively for business purposes.
When is a personal car journey considered business travel?
There are two main criteria that determine whether travel qualifies for reimbursement and is considered a business journey:
- The trip is necessary to carry out the employee’s professional duties — for example, visiting a client’s office or attending a conference.
- The employee must travel to a location other than their permanent workplace to perform their job.
It’s important to note that a normal commute — travel between home and a permanent workplace — does not qualify as business travel. HMRC classifies this as ordinary commuting, and employees cannot claim business mileage for it. This rule also applies to hybrid workers if working from home is not a contractual or permanent requirement and the office remains their permanent workplace.
However, if a workplace is classed as temporary, different rules apply. In that case, travel to and from the temporary location may qualify as business mileage.
Permanent workplace vs temporary workplace
You may have heard of the 24-month rule, which helps distinguish between a permanent and a temporary workplace.
While an employee cannot claim mileage allowance for travel to and from a permanent workplace, they can claim for travel to a temporary workplace. This is because travel to a temporary location is considered part of carrying out job duties, rather than ordinary commuting.
A workplace is classed as temporary if an employee is expected to work there for less than 24 months — hence the name of the rule.
Once you’ve considered these factors and understand where all travel patterns fit into HMRC’s guidelines, you’ll be able to calculate business mileage — and therefore mileage allowance payments for your employees — with confidence.
How do HMRC mileage rates work — and how do you calculate them?
The current AMAP rates are:
- Cars and vans: 45p per mile for the first 10,000 business miles in a tax year, and 25p per mile for any mileage thereafter.
- Motorcycles: 24p per mile, regardless of distance.
- Bicycles: 20p per mile, regardless of distance.
These mileage rates also cover the cost of owning and running the employee’s car. It’s an all-encompassing figure, and it cannot be used separately to claim for business expenses such as fuel costs, repairs, MOT, or road tax. It’s important to note that the mileage rate is calculated per employee, not per vehicle.
Let’s look at an example of how to calculate business mileage reimbursement.
If an employee travels 13,749 business miles in a tax year using their personal vehicle:
The first 10,000 miles are reimbursed at 45p per mile = £4,500.
The remaining 3,749 miles are reimbursed at 25p per mile = £937.25.
The employee’s total mileage reimbursement for that year would be £5,437.25.
On top of this figure, an extra 5p can be claimed for each passenger in the car, provided the passenger works for the same company and it is also necessary for them to undergo this business travel.
Are mileage rates the same for company cars and personal vehicles?
It’s important to reiterate that AMAP rates only apply to the use of a personal vehicle for business trips. When employees use a company car, different rules apply. HMRC publishes Advisory Fuel Rates (AFRs) for this purpose.
These AFRs are:
- Reviewed and updated quarterly (on 1 March, 1 June, 1 September, and 1 December).
- Based on engine size and fuel type (petrol, diesel, LPG).
As the name suggests, these rates are advisory rather than fixed, and less comprehensive than AMAP rates.
To summarize and avoid confusion, here’s a side-by-side comparison of AMAP rates and AFRs, outlining when each applies and what costs are covered.
| HMRC rate | AMAP (Approved Mileage Allowance Payments) rates | AFR (Advisory Fuel Rates) |
| Applies to | Employees using their personal car for business journeys | Employees driving a company car |
| What is covered | Full running costs (fuel, insurance, servicing, MOT, road tax, depreciation, wear and tear) | Fuel only – as all other costs are covered by the employer |
| Rates | – Cars: 45p per mile for first 10,000 miles per tax year, 25p per mile thereafter – Motorcycles: 24p per mile – Bicycles: 20p per mile | Varies quarterly by fuel type and engine size. September 2025 examples: – Petrol (1401–2000cc): 14p per mile – Diesel (up to 1600cc): 12p per mile – Electric: 8p (home charging) / 14p (public charging) |
| Tax treatment | Tax-free if within HMRC rates | Tax-free if within AFR rates; excess may be taxable |
| Updated by HMRC | Annually | Quarterly |
HMRC Advisory Fuel Rates: September 2025 Update
The September 2025 HMRC review of Advisory Fuel Rates shows that, for company car journeys in petrol, diesel, and LPG vehicles, rates remain largely unchanged this quarter, with only diesel showing small increases.
A key update is that, from 1 September 2025, HMRC introduced two separate mileage rates for fully electric company cars:
- 8p per mile when charging at home.
- 14p per mile when using a public charging point.
This replaces the previous flat rate of 7p per mile for electric cars and now better aligns reimbursement with the real costs of charging.
Managing your business mileage
Keeping clear and accurate records of HMRC mileage claims is essential. If you overclaim — for example, by recording more miles than were actually travelled or by including personal journeys instead of business trips — you risk fines or disputes with HMRC.
To remain compliant, you must record the date of each journey, the total distance travelled, and the purpose of the trip.
For finance teams, this process can quickly generate significant amounts of administration, adding both time and complexity to their workload.
From fuel cards to smarter spend management
Fuel cards have long been a simple way to streamline employee fuel payments. They reduce out-of-pocket spending, consolidate costs and enable spend tracking. For many businesses, this is the first step in bringing order to travel-related expenses.
But fuel is just one part of the bigger travel spend picture. At Soldo, we offer dedicated fuel payment solutions like fuel cards — but we don’t stop there. We’ve built a spend management platform that takes you beyond fuel, giving you real-time visibility and greater control across all employee travel expenses.
With Soldo, you can:
- Automate mileage reimbursement, policy compliance, and reporting.
- Track employee spending as it happens.
- Integrate seamlessly with accounting tools like Xero and QuickBooks Online.
- Set and adjust spend limits on prepaid cards — even by amount or merchant type (e.g., allow fuel, block entertainment).
- Reduce manual reconciliation and finance admin.
Fuel cards may solve one piece of the puzzle, but with Soldo, you get the full picture of business travel expenses — all in one platform.
How can Soldo help manage mileage allowance and more?
Accurate mileage tracking is essential for fair reimbursement and compliance. With Soldo, mileage tracking and reimbursement are automated and reliable. Our Google Maps integration calculates the exact mileage between start and end points of each journey, eliminating rough estimates and manual checks.
The platform comes pre-configured with the latest HMRC mileage rates. Soldo automatically applies the correct rate based on vehicle type and distance travelled, ensuring full compliance and removing the risk of over- or underpayments.
Employees can upload any documentation directly through the Soldo app, linking it instantly to transactions. Finance teams benefit from streamlined reporting, reduced admin, and a clear audit trail.
With Soldo, fuel costs and mileage expenses are handled accurately and effortlessly. Our platform gives you full visibility of all business spending — so you can stay compliant, maintain control, and make confident decisions.
