Severn Accounting
Tax & Accounting

Are you using the correct tax free mileage rates

By Ali Jaw ·

Claiming mileage expenses can be a straightforward way to reduce your tax bill, but many business owners and employees get it wrong. Whether you’re driving for work in Worcester or across the UK, HMRC has strict rules about what you can claim and at what rates. Get this right, and you’ll maximise your tax relief legitimately. Get it wrong, and you could face questions from HMRC or miss out on money you’re entitled to.

This guide covers the current tax-free mileage allowances, who can claim them, and how to keep proper records to support your claims.

The current HMRC mileage rates

HMRC sets the Approved Mileage Allowance Relief (AMAR) rates, which determine how much you can claim per mile without needing to justify your exact fuel and running costs. As of the 2024/25 tax year, the rates are:

  • Cars and vans: 45p per mile for the first 10,000 miles in the tax year, then 25p per mile thereafter
  • Motorcycles: 24p per mile
  • Bicycles: 20p per mile

These rates have remained unchanged since 2011, which means that if you’re claiming fuel costs based on actual expenditure, you might actually be better off using the fixed allowance for at least part of your mileage.

It’s important to note that these are maximum relief rates. You cannot claim more than these amounts unless you’re claiming actual fuel costs instead — but that requires a different approach and more detailed record-keeping.

Who can claim mileage allowances?

Not everyone can use the AMAR rates. The rules differ depending on your employment status:

Employees: You can claim AMAR relief if your employer doesn’t provide you with a mileage allowance, or if they provide less than the HMRC rate. If your employer pays you 45p per mile (or more) for cars, you can’t claim any further relief. However, if they only pay 30p per mile, you could claim the difference (15p) on your Self Assessment tax return.

Self-employed and business owners: You can claim either AMAR relief or actual expenses for fuel, maintenance, insurance, and depreciation. Most sole traders and limited company directors use AMAR because it’s simpler and often more generous, especially for higher-mileage users.

Company directors and employees: If your company reimburses you using the AMAR rates, the reimbursement is not a taxable benefit, which is straightforward and tax-efficient.

Keeping proper records

HMRC expects you to keep evidence of the miles you’ve claimed. “Evidence” doesn’t necessarily mean receipts for every journey — instead, you should maintain:

  • A mileage log or diary showing dates, destinations, and business purposes
  • Odometer readings at the start and end of the tax year
  • A note of any commuting miles (which you can’t claim) or private miles
  • Contemporaneous records rather than estimates made months later

Many people use smartphone apps or spreadsheets to track this information. The key is consistency and accuracy. HMRC is more likely to challenge claims where records are vague or seem inflated.

If you’re audited and can’t produce evidence, HMRC may disallow your claim entirely, so this isn’t an area to cut corners.

Making your claim

Employees should claim mileage allowance relief on their Self Assessment tax return, either on the main return or through the employment pages, depending on your circumstances. You’ll need your employer’s reference and details of the allowance they’ve paid you.

Self-employed individuals typically claim mileage as a business expense on their Self Assessment return or within their limited company accounts. The method is straightforward: multiply your business miles by the appropriate AMAR rate.

Company directors can either claim as employees (if they’re also employed) or ensure their company reimburses them at the AMAR rate, which avoids a taxable benefit.

A final word on changes ahead

Whilst the AMAR rates have been static for over a decade, there’s periodic discussion about whether they reflect modern running costs. Keep an eye on HMRC guidance, as rates can change. Some commentators suggest rates may be reviewed in light of inflation, though there’s no confirmed date for any change.

For now, the 45p/25p rates for cars remain your benchmark.

Mileage claims are one of the easiest tax reliefs to claim, but also one of the easiest to get wrong. By keeping clear records and using the correct rates, you’ll ensure you’re neither overstating your claim nor leaving money on the table.

For tailored advice, contact Severn Accounting — we’re here to help.