The Ultimate Guide to Mileage Rates for Company Cars and Vans

Driving for business comes with the responsibility of keeping track of your mileage rates, as HMRC has strict guidelines for claiming fuel and other expenses related to company cars. Here’s everything you need to know to stay compliant and maximize your reimbursements.

Understanding Mileage Rates for Company Cars and Vans

When employees drive a company-owned vehicle using their own fuel, they are reimbursed by their employer based on Advisory Fuel Rates (AFRs). These rates apply to each mile driven for business purposes and can also be used to cover the cost of private journeys using company fuel.

HMRC reviews and adjusts the approved per-mile rates quarterly to ensure fairness for both employees and employers. It is crucial for both parties to stay updated on these rates to avoid any financial discrepancies.

There are nine AFRs published by HMRC, with separate rates for petrol, diesel, and LPG-fueled vehicles based on engine capacity. These rates are calculated using average fuel efficiency data for fleet-registered vehicles and current fuel prices across the UK, rounded to the nearest penny.

Mileage Rates for Petrol Cars and Vans

Mileage Rates for Diesel Cars and Vans

Mileage Rates for LPG Cars and Vans

Mileage Rates for Electric and Hybrid Cars

Electricity is taxed differently, and HMRC has simplified the reimbursement system for electric vehicle (EV) drivers. The Advisory Electric Rate (AER) is set at 8p per mile for all electric cars, effective from June 1, 2024, regardless of size or efficiency. This rate is adjusted quarterly based on fleet vehicle data and home charging costs.

There are no specific mileage rates for hybrid cars, so HMRC recommends using the AFR system based on the vehicle’s engine size and primary fuel type.

Adjusting Mileage Rates for Real-World Costs

If the standard mileage rates do not cover actual expenses or leave drivers out of pocket, fleets can make adjustments with proper documentation. However, any excess reimbursement may be subject to taxation as additional income or profit.

Fleets have the option to set their own reimbursement rates if they can prove accuracy, or employees can reimburse actual costs instead of mileage-based calculations.

Mileage Allowance Payments for Personal Vehicles

For employees using their personal vehicles for business purposes, HMRC offers Mileage Allowance Payments (MAPs) to cover fuel and wear-and-tear costs. The current MAP rates are 45p per mile for the first 10,000 miles and 25p thereafter, with employers having the flexibility to set their own rates.

If employees receive less than the advisory amount from their employer, they may be eligible for tax relief through Mileage Allowance Relief (MAR).

To claim MAPs, employees must maintain a detailed mileage log with trip information, and only amounts exceeding the advisory rate are taxable. An additional 5p per mile is available for carpooling business journeys with fellow employees.

Note that MAPs do not cover road tolls, parking fees, congestion charges, or fines.