A considerable number of professions require employees to travel extensively. In the majority of cases, employers will pay their workers for the mileage that they incur while carrying out their duties. However, some individuals are not aware that there are potentially beneficial tax implications for those who travel as part of their job.
To understand how mileage allowance payments affect your overall tax position and take home pay, you can use our free Income Tax Calculator.
The current tax system allows for what are known as 'mileage allowance payments'. Under this system, per-mile mileage payments made by an employer to an employee are not subject to Income Tax, as long as they are paid at or below the rate set by the government.
In the first instance, it is important to note that only business travel qualifies for these tax-exempt payments; if you also use a Company Car for personal purposes, tax exemptions will not apply to mileage incurred as a result of non-business activities. Even factoring this in, however, the mileage allowance payments system can still represent a significant tax saving.
Statutory Mileage Rates
The government has established 'statutory mileage rates', which determine the acceptable amount that can be paid to an employee per mile of business travel. These rates differ depending on the vehicle used, and the number of miles for which a claim is being made. The following rates apply to 2025/26:
- For business travel in cars, the first 10,000 miles can be paid at 45 pence per mile, and all subsequent miles at 25 pence per mile.
- Travel on a motor cycle or bicycle, regardless of the number of miles travelled, can be paid at 24 and 20 pence per mile respectively.
The HMRC form P87 provides an opportunity for employees to list their employment-related expenses for the purpose of tax relief. Information concerning business mileage should be given on this form.
The form requires you to give details of your business travel, including the number of miles travelled using each type of vehicle. You will then be required to calculate the total amount of tax relief to which you are entitled.
Enter your salary and get a clear breakdown of your income tax, National Insurance, and take-home pay for the 2025/26 tax year. See exactly where your money goes.
Try our Income Tax Calculator free, here on this site →Your situation may be slightly different. ask a question below ↓ and our editorial team will reply with our advice.
Further Relief
Any mileage allowance payments made by your employer are tax free by default. On your P87 form you must, therefore, provide the total sum received in the tax year in such payments. This will then be deducted from your total earnings, along with any other Expenses That Attract Exemptions, to establish your total tax liability for the year.
In many cases, however, employees do not receive as much tax relief as they are entitled to. The total relief available is based not on the mileage allowance payments received from your employer, but on the total number of miles you have travelled. As such, if you have received allowance payments for fewer miles than you have travelled, you will be entitled to further relief.
HMRC will multiply the number of miles travelled by the relevant statutory mileage rate to calculate your total exemption. From this will be subtracted any mileage allowance payments that you have received. The resulting sum will be your remaining exemption. This can be offset against other employment related earnings.
You may find it useful to download the P87 form from the HMRC website in advance of your annual tax return. Finally, as with any tax matters, your Tax Office will be able to assist you with any queries.
Plus claiming for cleaning of chef uniform as well because i wash them myself
Any help and information on this would be a great help.
Many thanks
I use my personal car for visiting clients around the country, the company pays be back the fuel I have put in the car for that journey example £50.00.
They don't however pay any pence per mile, can I still claim back the 45p per mile for my work journeys ?
Many thanks.
As they only pay 20p per mile, I was expecting to claim tax relief on the additional 25p. However, if I only travel 500 miles on month, the nominal £100 mileage expenses is not paid due to the £150 excess policy.
Does this mean I can claim tax relief on the full 45p per mile for those instances where mileage is not paid, or can I only claim for the 25p difference even if I am not reimbursed directly ?
Also, if I paid no tax one year (without taking into consideration an allowance for the use of my private vehicle) how can I benefit from this - can I carry it over into another year where I did pay tax? Many thanks in advance .....
I am the sole Director of a limited company working from home and do a Self Assessment tax return annually. My tax affairs are very simple!! Income from Dividends and PAYE only.
However, I use my personal car for business site visits and meetings but I am not reimbursed for this use / mileage by my Company. Can I claim the cost of these journeys as a personal tax allowance? Some mileage may be paid to my Company by a client as a disbursement on an invoice but many miles are not chargeable. As it’s my car can I claim all mileage as a tax allowance? Any help gratefully received!!
Ask The Tax Guide a question
Ask our editorial team a question and we will reply with our advice. Tell us as much about your situation as you can: the more detail you give, the more useful our answer can be.
You do not need to use your real name. Please do not include your full address, phone number, email address, or the names of other people. We may edit or remove identifying details for privacy and legal reasons.
Comments are moderated before publication.