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Employees may pay for the fuel that they use for business journeys undertaken in their own car or in a company car. Often, an employer will reimburse this cost by paying a mileage allowance. However, where employees meet the costs themselves, they are able to claim tax relief. The relief available depends on whether the employee is using their own car or a company car. Employees are also able to claim relief if their employer pays a mileage allowance which is less than the tax-free rates set by HMRC.
Employees using their own car for business travel
Where an employee uses their own vehicle for business travel, they are able to claim tax relief using the approved mileage rates set by HMRC. A claim is not limited to cars – relief can also be claimed if an employee uses their van, motorbike or bicycle for business travel. The amount that they can claim is the amount at the approved rates less any amount received from their employer towards the costs. The approved rates, which are set out in the table below, include an element for deprecation, insurance and maintenance, as well as the cost of the fuel. For cars and vans, a higher rate applies to the first 10,000 business miles in the tax year.
Type of vehicle |
Rate per mile |
Cars and vans |
First 10,000 business miles in the tax year: 45p
Subsequent business miles: 25p |
Motorcycles |
24p |
Bicycles |
20p |
Example
Wendy uses her own car for business travel, driving 2,100 miles in the tax year. Her employer pays a mileage rate of 30p per mile.
The approved amount is £945 (2,100 miles @ 45p per mile). Wendy receives mileage payments of £630 from her employer (2,100 miles @ 30p per mile). Wendy is able to claim tax relief for the shortfall of £315
Company car drivers
Company car drivers can claim tax relief for the cost of fuel or electricity used for business journeys in a company car to the extent that this is not reimbursed by their employer. They will need to keep records of the actual fuel or electricity costs. The approved mileage rates do not apply to company car drivers.
Making a claim
A claim can be made using HMRC's online service or, where the employee needs to complete a Self Assessment tax return, in the employment pages of their tax return. A claim can also be made by post on form P87. The employee will need to provide evidence in support of their claim in the form of a mileage log. This must show:
- the reason for every journey;
- the postcode for the start point; and
- the postcode for the end point.
Where a claim is made for more than one employment, a copy of the mileage log must be provided for each claim.
Partner note: ITEPA 2003, s. 229 – 232; www.gov.uk/tax-relief-for-employees/vehicles-you-use-for-work.