Mileage reimbursement is the refunding of any costs an employee has paid for business travel. These expenses can be claimed as tax-free costs by the employer or the employee, as long as trips the employee makes are ‘wholly and exclusively’ for business purposes.
The HRMC mileage reimbursement rates differ according to whether the drivers are using their own vehicles or company cars for work, and whether they’re employed or self-employed. Let’s take a look at this below.
The 3 main types of mileage reimbursement:
Key questions you need answers to:
- Is there a specific executor mileage reimbursement rate in the UK?
- What are the different options to reimburse employees for their mileage?
- What to consider when implementing a mileage reimbursement policy?
- How can I learn more about mileage claims?
- Quick Tip – How to implement a mileage reimbursement policy?
1. Company Car Mileage Rates
When an employee uses a company car, they usually still need to pay for their own fuel and other costs. Company car fuel rates (also known as Advisory Fuel Rates) are a guideline for the employer to know how much they should reimburse employees for business journeys in a company car.
Advisory Fuel Rates (AFRs) are beneficial to employers because using these, or lower rates, means the HMRC doesn’t require any tax to be paid on these expenses. This is because the HMRC accepts that there is no taxable profit and no Class 1A National Insurance to pay.
These are the current AFR rates:
|1400cc or less||12p||8p|
|1401cc to 2000cc||14p||10p|
|1600cc or less||10p|
|1601cc to 2000cc||11p|
If the employee drives 8,000 business miles using a petrol car which engine size is over 2000cc, he/ she could claim £1,680 back from the employer.
These rates are revised quarterly, so if you don’t want to miss any updates and fail to set the right reimbursement rates, fill out your contact details below and we will send the latest updates straight to your inbox:
2. Private Car Mileage Rates
For employees who use their personal vehicle for business trips, their employer should use a different rate to cover their costs. The Approved Mileage Allowance Payments (AMAPs) cover not only fuel costs but also insurance, wear and tear of the vehicle and any other costs incurred solely for business purposes.
Similarly to the company car fuel rates, the employer can benefit by using the AMAP rates as a guideline and can pay these rates, or lower, tax-free. Which is why they are known as ‘approved payments’.
The approved amount is determined by multiplying the employees’ business miles for the year by the AMAP rate for their vehicle. The current rates are:
|Vehicle Type||Per Business Mile – under 10,000 miles||Per Business Mile – over 10,000 miles|
|Cars and Vans||45p||25p|
The employee travels 12,000 business miles in their privately owned car – the approved amount for the year would be £5,000.
These rates are updated quarterly. If you want to make sure that you don’t miss an update, and subsequently any financial losses with mileage deductions, fill out the form below and we’ll keep you up to date:
3. Self Employed Mileage Rates
When it comes to sole traders and business partnerships, you use the AMAP rates in exactly the same way as an employee using their personal car. As self-employed, you cannot officially own a company car, because legally you and your business are the same.
This means you should use the HMRC’s AMAP rates to work out how much you can claim back at tax time.
Check out the rates for Private Car Mileage Reimbursement (above) to find out how much you can claim as travel expenses when you submit your self assessment tax return at the end of the tax year.
For more info, read our Claiming Mileage as a Self Employed article.
Is there a specific executor mileage reimbursement rate in the UK?
There is no specific executor mileage reimbursement rate in the UK, however, you could use the HMRC AMAP rates which you can find above. These are the rates used by self-employed and those who drive their personal vehicles for business journeys.
What are the different options to reimburse employees for their mileage?
When it comes to reimbursing an employee there are three main choices:
- The employer reimburses the employees’ mileage using the HMRC mileage rates.
- The employee pays for the fuel and then claims the money back using the HMRC rates at the end of the tax year.
- The employee pays more income tax and national insurance to use the company car for both business and personal miles.
What to consider when implementing a mileage reimbursement policy?
- It is the responsibility of both the business and employee to keep track of their miles and report them accurately. This is an area often overlooked, particularly for those claiming back private mileage as these are usually not accounted for.
- The company is only obliged to pay the cost of the fuel per mile, as deduced from fuel receipts, so employees will have to keep hold of their receipts. This is important in the case of an inspection from the HMRC.
- When you choose a method of mileage reimbursement, either actual expenses or simplified expenses (using a mileage rate), you need to stick with your chosen method as long as the employee uses the same vehicle.
- By keeping the receipts, the company will be able to claim VAT on the business mileage. Without them, the VAT entitlement for the business is not claimable.
- Private mileage deduction schemes may be relatively easy to implement, but employees would have to pay benefit in kind tax when using company cars for their private journeys.
How can I learn more about mileage claims?
There are a lot of HMRC rules to understand when it comes to recording business mileage and managing mileage claims. Reading through all the information on different websites can get confusing, which is why we have put together a complete guide to mileage claims, where our experts at Autotrip go through everything that you ought to know.
Quick Tip – How to implement a mileage reimbursement policy?
Here at Autotrip, we’ve developed a mileage tracking solution that helps increase visibility into the practices of the driving staff during regular business hours.
This helps drivers feel more in control since they can use Autotrip to claim all their mileage expenses on business trips accurately while keeping their private trips personal.
Our software also automatically calculates the VAT amount that businesses can claim back, and drivers can attach receipts to their claims, making it easy to organise all business travel expenses in one centralised place.
Find out how we make mileage simple at autotrip.com and see how we’ve recorded 7.8M miles and 482,000 business trips in the past year, saving our clients 1000s of hours that would have been otherwise spent logging mileage manually.
*This article was updated in September 2019 with the current AFR rates.