Please be aware that this resource is informational only, and many external factors, unique to your company might apply.
Each company must make their own decisions about how they meet their tax obligations.

Mileage Allowance

Mileage Allowance Payments (MAPs) are what you pay your employee for using their own vehicle for business journeys.

You can pay your employee an approved amount of MAPs each year without having to report them to HMRC. The approved MAPs, or AMAPs, are calculated by multiplying the approved rate (which covers wear and tear, in addition to fuel used) by the business miles driven. The approved rate varies by the mode of transportation and cumulative business miles travelled in a given tax year:

Approved Mileage Rates (2020-2021)

 

First 10,000 miles within the tax year Above 10,000 miles within the tax-year
Cars and vans 45p 25p
Motorcycles 24p 24p
Bikes 20p 20p

 

Note: If your employee carries another employee in their own car or van on a business journey, you can pay them passenger payments of up to 5p per mile, per passenger, tax-free.

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Learn how you can apply these mileage rates in your Rydoo account here.

Additional notes on the mileage allowance:

  • It does not matter if your employee uses more than one vehicle in a year – it’s all calculated together.
  • If you pay more than the approved amount, the excess must be added to any other earnings the employee receives in the earnings period.
  • Anything below the approved amount you will not have to report to HMRC or pay tax, but, your employee will be able to get tax relief (called Mileage Allowance Relief, or ) on the unused balance of the approved amount MAR.
  • This only applies to employees using their own vehicle. If you are reimbursing your employees for fuel mileage on a company car, please refer to the HMRC’s advisory fuel rate calculation: https://www.gov.uk/guidance/advisory-fuel-rates#when-you-can-use-the-mileage-rates
  • “Ordinary commuting”, or any travel from your home to a permanent workplace, is not approved for MAPs.

Reclaim on VAT mileage

As a business, companies can reclaim VAT on their employees’ mileage expenses if they’re paying their employees a mileage allowance for using their own vehicle for work. However, companies will only be able to reclaim the VAT from the fuel portion of the mileage claim.

Advisory Fuel Rates

For calculation of the fuel portion of a business trip, a simple method is applied by using HMRC published Advisory Fuel Rates (AFR). The rates are published by HMRC to cover the amount of fuel you can attribute to a mileage claim of a business trip.

The rate varies based on the type of fuel (petrol, diesel, or LPG) and the engine size of your vehicle.

Petrol or LPG rates-per-mile

 

Engine Size Petrol AFR LPG AFR
Up to 1400 13p 8p
1401 to 2000 15p 10p
Over 2000 22p 15p

 

Diesel rates-per-mile

 

Engine Size Diesel AFR
Up to 1600 11p
1401 to 2000 13p
Over 2000 16p

 

Once the fuel part is known, you can then claim back the VAT (20%) on your fuel expenses.

Other notes on advisory rates:

  • The advisory electricity rate for fully electric cars is 5 pence per mile.
  • Hybrid cars are treated as either petrol or diesel cars for advisory fuel rates.
  • The HMRC reviews AFRs quarterly: https://www.gov.uk/guidance/advisory-fuel-rates
  • Tax relief is available only to the extent that an expense has actually been incurred, so employees must keep a record of the fuel receipts if companies want to claim the VAT on the mileage expenses.
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What is the UK mileage report and how can Rydoo help you be compliant? Learn here.

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