Fleet Mileage Allowance UK: HMRC Rates, Tax and Best Practice
Mileage allowance is one of the most frequently misunderstood areas of fleet management tax in the UK. Get it wrong — paying above HMRC rates without recognising the tax consequences, or failing to verify grey fleet mileage claims — and you create liability for the business, for the employee, or both. This guide covers the current HMRC Approved Mileage Allowance Payment rates, the distinction between AMAP and Advisory Fuel Rates for company cars, how to manage grey fleet mileage effectively, and how GPS-based mileage capture reduces administrative burden and claim inaccuracy.
HMRC Approved Mileage Allowance Payment rates
When an employee uses their own vehicle for business travel, the employer can reimburse them at the HMRC Approved Mileage Allowance Payment rates without any income tax or National Insurance arising on the payment. AMAP rates are designed to cover the full cost of using the employee's own vehicle — fuel, depreciation, servicing, tyres, and insurance — not just fuel.
The current AMAP rates, which have been unchanged since April 2011, are:
| Vehicle type | AMAP rate |
|---|---|
| Cars and vans — first 10,000 miles | 45p per mile |
| Cars and vans — above 10,000 miles | 25p per mile |
| Motorcycles — all business miles | 24p per mile |
| Bicycles — all business miles | 20p per mile |
| Passenger in employer vehicle | 5p per mile per passenger |
The passenger rate of 5p per mile per passenger applies when an employee carries other employees as passengers on a business journey in their own vehicle. This is on top of the standard AMAP rate — so a driver carrying one work colleague on a 10-mile business journey can receive 45p + 5p = 50p per mile tax-free.
If an employer pays less than the AMAP rate — for example, reimburses at 40p per mile rather than 45p — employees can claim Mileage Allowance Relief for the 5p gap through their self-assessment tax return. If the employer pays above the AMAP rate, the excess is treated as a taxable benefit and must be reported to HMRC via payroll (for directors, section 336 relief is available in some cases).
Advisory Fuel Rates: the rules for company car drivers
Company car drivers — employees who drive a vehicle owned or leased by their employer — cannot use AMAP rates for fuel reimbursement, because those rates include an element for vehicle depreciation and running costs that does not apply when the employer owns the vehicle. Instead, HMRC publishes Advisory Fuel Rates (AFR) that cover fuel costs only.
AFR rates are updated quarterly — in March, June, September, and December — and vary by engine size and fuel type. The rates are intended to represent the cost of fuel per mile driven in an average vehicle in each category, based on published fuel prices and typical fuel consumption data. For electric vehicles, HMRC publishes a separate Advisory Electric Rate (AER).
Using the current AFR (or AER for electric vehicles) as the reimbursement rate for company car drivers claiming back business fuel means that no income tax or NIC arises on the payment, and no Benefit in Kind is created. Paying above the AFR creates a taxable benefit; paying below means the employee bears the excess fuel cost personally.
Fleet managers should ensure that any company car fuel reimbursement policy references the current HMRC AFR rates and includes a process for updating the rate each quarter when HMRC publishes the new figures. Failure to update rates when HMRC revises them — particularly during periods of significant fuel price movement — creates either over-payment (with tax implications) or underpayment (which is unfair to employees and can affect driver retention).
Managing grey fleet mileage reimbursement
Grey fleet — employees using their own privately owned vehicles for business travel — accounts for a significant proportion of business mileage in the UK. HMRC estimates that grey fleet comprises approximately 14 million vehicles that are used for business travel at some point each year, making it the dominant mode of business travel for many UK organisations.
From a fleet management perspective, grey fleet mileage creates two distinct challenges. The first is financial: mileage claim verification. Without GPS-based mileage capture, grey fleet mileage claims rely entirely on the accuracy of employee self-reporting — and research consistently shows that self-reported mileage is higher than GPS-verified mileage for the same journeys. The discrepancy is rarely deliberate fraud; more often it results from rounding up journey distances, failing to account for diversions, or including personal mileage alongside business mileage.
The second challenge is compliance: duty of care. Employers have the same health and safety responsibilities for employees driving their own vehicles on business travel as for employees driving company vehicles. This means employers must check that grey fleet vehicles are fit for purpose, that drivers have valid licences and appropriate insurance (including business use cover), and that risk assessments are in place for the journeys being undertaken. Our guide to grey fleet management UK covers the duty of care obligations in full.
GPS mileage logging — through the FleetGS driver app or a dedicated mileage capture app — addresses the verification challenge by recording the actual distance of each business journey with a GPS-derived distance figure. This creates an auditable record that the finance team can review before approving claims, and provides HMRC-compliant mileage data if the employer is ever questioned on the accuracy of mileage reimbursements.
Mileage capture systems: from paper to GPS
The way organisations capture mileage for reimbursement purposes exists on a spectrum from entirely manual to fully automated. Understanding the trade-offs at each point helps fleet managers make the right choice for their organisation's size and operating model.
Paper mileage logs
Advantages
No technology required. Familiar to drivers.
Limitations
Time-consuming to complete and process. No verification mechanism. Prone to errors, rounding, and occasional padding. Difficult to reconcile with actual journey costs. Creates significant administration at month-end.
Spreadsheet-based claims
Advantages
Easy to implement. Can include basic validation rules. Familiar format for finance teams.
Limitations
Self-reported mileage remains unverified. Still generates significant manual data entry. Difficult to detect anomalies in large datasets without additional analysis. No link to actual vehicle or route data.
Expense management software
Advantages
Centralises mileage claims alongside other expenses. Can integrate with payroll. Provides audit trail for approvals.
Limitations
Mileage data is still self-reported unless GPS integration is used. Software cost adds to overheads. Verification of distance accuracy depends on postcode-based route calculation, which may not match actual routes driven.
GPS-based mileage capture
Advantages
Actual journey distance recorded from GPS data. Business and personal journeys can be categorised by the driver in the app. Verifiable audit trail for HMRC purposes. Typically 8–15% lower claimed mileage than self-reported equivalents. Integrates with fleet management platforms for consolidated reporting.
Limitations
Requires drivers to carry a smartphone and use the app consistently. Privacy considerations must be addressed — personal journeys should remain private, only business journeys visible to the employer.
Controlling mileage allowance costs across the fleet
For organisations with significant grey fleet mileage, controlling the total mileage reimbursement cost requires both accurate capture and active management of business travel patterns. The two most effective levers are reducing unnecessary mileage and improving the accuracy of reimbursed mileage.
Unnecessary mileage arises when drivers take inefficient routes, make avoidable additional journeys, or travel to meetings that could be conducted remotely. GPS-based mileage analysis — looking at total business miles per driver per month, and the routes taken for common journey pairs — identifies inefficiency that is invisible in a spreadsheet-based mileage claim process. Savings of 10–20% in total mileage reimbursement costs are common when organisations move from unverified self-reporting to GPS-based capture and route analysis.
For larger organisations, analysing whether grey fleet mileage volumes justify transitioning certain frequent-driver employees to company vehicles — where whole life cost is typically lower than AMAP reimbursement at high mileage — is a worthwhile exercise. At 10,000+ business miles per year, the AMAP rate reimburses the employee at 45p per mile for the first threshold, generating a significant annual payment that may exceed the cost of providing a company vehicle with Advisory Fuel Rate reimbursement.
FleetGS's GPS timesheets and mileage tracking capture business journey data automatically from the driver app, generating per-driver mileage reports that fleet managers and finance teams can use for reimbursement processing, cost analysis, and HMRC audit purposes. For a broader view of fleet cost management, see our fleet cost per mile guide.
Frequently asked questions
HMRC sets Approved Mileage Allowance Payment (AMAP) rates that employers can pay tax-free when employees use their own vehicles for business travel. For cars and vans, the AMAP rate is 45p per mile for the first 10,000 business miles in the tax year, and 25p per mile for any miles above 10,000. For motorcycles, the rate is 24p per mile. For bicycles, it is 20p per mile. These rates have not changed since 2011. Employers can pay more than the AMAP rate, but any amount above the AMAP rate becomes a taxable benefit that must be reported through payroll. If an employer pays less than the AMAP rate, employees can claim Mileage Allowance Relief on the difference through their self-assessment tax return. AMAP rates apply to business travel only — commuting (travel from home to a permanent workplace) is not eligible.
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Automate mileage capture across your whole fleet
FleetGS captures GPS-verified journey distances automatically from the driver app, generating auditable mileage records for both company vehicles and grey fleet reimbursement — replacing paper logs and unverified spreadsheets.