How does mileage allowance relief work for business travel?

Full answer

Approved Mileage Allowance Payments (AMAPs) are the tax-free rates HMRC allows employers to reimburse employees for using their own vehicle on business journeys, without the payment being treated as a taxable benefit. **The AMAP rates for cars and vans** - **First 10,000 business miles in the tax year**: 45p per mile - **Miles above 10,000 in the same tax year**: 25p per mile These rates are intended to cover fuel, wear and tear, insurance, and depreciation combined -- they are not just a fuel-only rate. **Motorcycles and bicycles** Different flat rates apply: 24p per mile for motorcycles (no mileage threshold reduction), and 20p per mile for bicycles, both fixed regardless of total annual mileage. **Worked example: employer pays full AMAP rate** Emma drives 12,000 business miles in the tax year. Her employer pays her 45p/mile for the first 10,000 miles (£4,500) and 25p/mile for the remaining 2,000 miles (£500), totalling £5,000. Because this matches the AMAP rate exactly, none of it is taxable and no further relief is due. **Worked example: employer pays less than AMAP (Mileage Allowance Relief)** James drives 8,000 business miles and his employer only reimburses him at 25p per mile (£2,000), rather than the full 45p AMAP rate. The shortfall is (45p − 25p) × 8,000 = £1,600. James can claim Mileage Allowance Relief (MAR) for this £1,600 shortfall, reducing his taxable income by that amount -- worth £320 back for a basic rate taxpayer (20% × £1,600), or £640 for a higher rate taxpayer (40%). **Worked example: employer pays more than AMAP** If an employer pays above the AMAP rate (say 55p/mile), the excess over 45p/25p becomes a taxable benefit, reported on the employee's P11D (or payrolled), and subject to Income Tax and employer Class 1A National Insurance. **How to claim Mileage Allowance Relief** If your employer pays less than the AMAP rate (including if they pay nothing at all), you claim the difference through Self Assessment, or via a P87 form/HMRC online claim if you do not otherwise file a tax return, provided the total claim (combined with other employment expenses) does not exceed £2,500 in the tax year (above which Self Assessment registration is required). **Passenger payments** Employers can also pay an extra 5p per mile tax-free for each business-related passenger carried in the same vehicle on the same journey, on top of the driver's own mileage rate.

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