HMRC Mileage Rates

One of your company’s expenses is reimbursements paid to employees who use their vehicles for business travels. By law, the company has to cover things like fuel costs, road tolls, and other expenses which the worker incurs on the work trips.

hmrc mileage rates form and pen on desk

Estimating the value employees deserve as reimbursements for work-related travel can be difficult. However, the HMRC Mileage Rate system makes things easier.

Read on to know how HMRC Mileage Rates are useful in reimbursement of business travel expenses. You will also learn how to calculate your mileage Rates.

What Are HMRC Mileage Rates?

Companies use HMRC Mileage Rates to calculate the total amount of money they must reimburse employees who use their private cars for travels.

Per legal requirements, business travels are free from taxation, so employers must compensate individuals who make such trips with their personal vehicles. They must cover the cost of fuel, tolls, VAT/parking fees (in some cases), and even wear and tear.

The HMRC rates remove the stress by stipulating a flat rate for specific miles travelled.

Read more: Managing Company Cars And Advisory Fuel Rates

Get a Beginners Guide to Fleet Taxes:


How To Calculate HMRC Mileage Rates?

HMRC mileage allowance rates streamline the allocation of mileage allowances. The rates are relatively straightforward and do not require heavy calculation.

Currently, employers refund employees 45 pence per business mile for the first 10,000 miles. However, once the business miles cross 10,000 miles, the mileage rate drops to 25 pence.

Say an employee travelled 1000 miles on business travels within the initial 10,000-mile period. You will have to multiply 45 pence by 1000 miles and then convert to pounds.

If you calculate this well, you should get £450 as the amount you have to reimburse the employee.

There is also a “passenger rate” included in the HMRC Mileage allowance system. The passenger rate of 5 pence per mile is paid to employees who transport a co-worker on a business-related trip.

company cars driving through city intersection, company cars follow hmrc mileage rates

If your employees used multiple vehicles, you still have to pay based on the total miles accrued on both vehicles. So if an employee used different cars for the business trips, you must note the mileage and then make payments for each vehicle.

Note: The law does not compel you to pay the total approved amount for mileage reimbursement. If you only pay part of the reimbursement, your employees can claim tax relief provided that they have mileage records.

Do HMRC Mileage Rates Apply to All Drivers?

HMRC Mileage allowance only apply to drivers who make trips for work purposes. This means members of staff who use their cars for non-work activities do not get to receive any mileage allowance.

HMRC is quite strict on the criteria a trip must fulfill to be defined as a “business trip”.

Firstly, that the trip must be highly crucial to that job. Second, the employee must travel to execute that job.

driving a company car private mileage

Without fulfilling these two requirements, drivers cannot qualify for payments under HMRC Mileage allowance system. And it’s not possible to find ways around this law.

For example, a driver cannot claim mileage allowance because he made some business-related stops during his personal journey. The sole purpose of a business trip must be strictly for business. Also, an employee cannot claim mileage allowances if the business trip is brief. The business travel must be extended for it to receive reimbursements.

Note: If a driver completes a private trip in a company vehicle, it falls under company car private mileage and requires no reimbursement.

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Why Are Private Miles Significant?

Private miles are the opposite of business miles. And, like you expect, employees receive no allowances for company car private mileage.

However, it can be difficult for people to differentiate between private miles and business miles. Luckily, HMRC has made clear suggestions on what “private miles” look like:

  1. A trip that was originally intended for personal purposes but was used to attend to a few business matters: If you are going to claim mileage allowance, then the entire trip needs to cater to business matters. Once you change routes for personal purposes, it becomes private miles.
  2. A daily journey between the workplace and the employee’s residence. Mileage rates do not apply to an employee’s commute from his house to work. Neither do they apply to commute to anywhere that doesn’t serve as an office.
  3. A trip that has no business-related objective. This is obvious already—if the trip isn’t made in the interest of conducting business, it is a private journey and the mileage is recorded under company car private mileage if you use a company vehicle.

Read more: Offset Rising Company Car Taxes With Fleet Geo

Conclusion

It is necessary for employees and employers to know how mileage allowances work. This will reduce disputes and streamline payments of allowances.

You can use Vimcar Fleet Geo to track business miles and company car private mileage claims. Our fleet management system can log routes, trip hours, and fuel consumption on trips taken by your employees for business purposes.

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