Mileage reimbursement is usually tax-free for an employee when it stays within HMRC's approved mileage allowance rules and the journey is genuinely for business.
For the 2026/27 tax year, the approved amount for cars and vans is 55p per mile for the first 10,000 business miles, then 25p per mile after that. Motorcycles are 24p per mile and bicycles are 20p per mile.
The tax problem starts when an employer pays more than the approved amount, pays for journeys that are not business journeys, or cannot show reliable mileage records.
Quick answer: when is mileage reimbursement taxable?
Mileage reimbursement is not usually taxable if:
- the employee used their own vehicle for a qualifying business journey;
- the employer pays no more than HMRC's approved amount for the tax year;
- the claim is backed by mileage records;
- the journey is not ordinary commuting.
Mileage reimbursement can become taxable if:
- the employer pays above the approved amount;
- the claim includes home-to-work commuting;
- the payment is not linked to real business miles;
- records are too weak to support the claim.
If the employer pays less than the approved amount, the employee may be able to claim Mileage Allowance Relief on the difference.
HMRC approved mileage rates for 2026/27
HMRC calls the tax-free threshold the approved amount. You work it out by multiplying the employee's business miles by the approved rate for their vehicle.
| Vehicle type | First 10,000 business miles in the tax year | Each business mile over 10,000 |
|---|---|---|
| Cars and vans | 55p | 25p |
| Motorcycles | 24p | 24p |
| Bicycles | 20p | 20p |
For tax years from 2011 to 2026, cars and vans were 45p for the first 10,000 business miles. From 6 April 2026, GOV.UK lists the car and van rate as 55p for the first 10,000 business miles.
That change matters for employers updating payroll, expenses policies, mileage templates, and employee guidance.
Example: paying within the approved amount
An employee drives 4,000 business miles in their own car during the 2026/27 tax year.
Approved amount:
- 4,000 miles x 55p = GBP 2,200
If the employer reimburses GBP 2,200 or less for those qualifying miles, there is normally nothing to report for tax on that mileage payment.
Example: paying above the approved amount
An employee drives 4,000 business miles in their own car. The employer pays 65p per mile.
Approved amount:
- 4,000 miles x 55p = GBP 2,200
Amount paid:
- 4,000 miles x 65p = GBP 2,600
Excess:
- GBP 2,600 - GBP 2,200 = GBP 400
The excess over the approved amount is taxable. GOV.UK says payments above the approved amount must be reported and the excess added to pay so tax can be deducted as normal.
Example: paying below the approved amount
An employee drives 4,000 business miles in their own car. The employer pays 35p per mile.
Approved amount:
- 4,000 miles x 55p = GBP 2,200
Amount paid:
- 4,000 miles x 35p = GBP 1,400
Shortfall:
- GBP 800
The employer does not normally report or pay tax on the shortfall. The employee may be able to claim Mileage Allowance Relief on the unused balance.
What counts as business mileage?
Business mileage usually means travel an employee has to do as part of their job. It might include:
- travelling from the workplace to a client site;
- visiting suppliers;
- travelling between sites;
- going to a temporary workplace;
- driving between care visits, jobs, or appointments during the working day.
Ordinary commuting is different. Travel between home and a normal permanent workplace is not usually business mileage for tax-free mileage reimbursement.
This distinction matters in mobile teams. For example, a care worker's travel between visits may need different treatment from the drive from home to the first normal workplace. Employers should check the journey purpose, workplace pattern, and HMRC guidance before treating mileage as tax-free.
What records should employers keep?
Mileage claims need enough detail to show that the payment was for business travel.
For each claim, keep:
- Date of the journey.
- Start and end points.
- Business purpose.
- Vehicle type.
- Business miles.
- Rate paid per mile.
- Employee submitting the claim.
- Manager approval.
- Any passenger mileage payment, if relevant.
Weak records create risk. If the employer cannot show that the payment was for qualifying business mileage, HMRC may challenge the tax treatment.
Mileage, payroll, and expenses should connect
Mileage starts as an expense claim, but it can affect payroll when:
- the employer pays above the approved amount;
- an employee receives a taxable benefit;
- mileage is linked to care visits, shifts, travel time, or worker pay;
- payroll needs to separate taxable and non-taxable amounts.
Workmax helps employers keep mileage, expenses, timesheets, approvals, and payroll records connected. That is especially useful for mobile teams, care providers, field teams, and multi-site employers where mileage claims happen every pay period.
If mileage claims are creating payroll questions, pair this guide with:
- Expenses and benefits software
- Payroll software
- Care worker mileage and travel time payroll calculator
- Care worker take-home pay calculator
Employer checklist
Before approving mileage reimbursement, check:
- Is the journey a business journey, not ordinary commuting?
- Is the employee using their own vehicle?
- Which vehicle rate applies?
- Has the employee crossed 10,000 business miles for cars or vans in the tax year?
- Is the rate within the HMRC approved amount?
- Is any excess being handled through payroll?
- Are mileage records complete enough for an HMRC review?
Official sources checked
This article was refreshed against the following official sources on 1 July 2026:
- GOV.UK: business travel mileage for employees' own vehicles
- GOV.UK: travel mileage and fuel rates and allowances
Bottom line
Mileage reimbursement is not automatically taxable. The key test is whether the payment is for genuine business mileage and stays within HMRC's approved amount.
For 2026/27, employers should update their car and van mileage policies to reflect the 55p first-10,000-mile rate, keep clear journey records, and make sure payroll can handle any taxable excess correctly.
