Megan Burnham

Business travel has its upsides: getting out of the office, meeting clients face to face, maybe even a halfway decent hotel breakfast. But when the trip’s over, the expense admin that follows? Not quite so appealing. 

That’s where per diems come in. Rather than asking employees to track every coffee, sandwich, and taxi ride with a receipt, a per diem system gives people a set daily allowance to cover those costs. It’s simpler, more predictable, and—when it’s set up correctly—much easier for everyone to manage. 

Whether you’re updating your company expense policy, making sure you’re HMRC compliant, or an employee who just wants to understand what they’re entitled to, this guide has you covered. 

We’ll walk through what per diem actually means, the UK rates for 2026/27, what you can and can’t claim, and how to handle it all without it becoming a headache. 

What does per diem mean? 

A per diem is a fixed daily allowance paid to employees to cover the cost of meals (and sometimes other incidental expenses) while they’re travelling for work. 

Rather than reimbursing each individual expense, a £3.80 coffee here or a £9.50 lunch there, the per diem system pays a flat daily rate. Employees don’t always need to provide receipts for each item (though they do need to show the meal happened during the trip), and employers don’t have to spend hours cross-checking itemised claims. 

It’s worth noting that per diem is sometimes used more broadly to refer to any form of daily subsistence allowance, including accommodation. In the UK, though, it most commonly refers specifically to meal allowances based on journey duration—as set by HM Revenue & Customs (HMRC). 

To make things clearer, here’s the key difference: 

• Per diem: a fixed flat rate, paid regardless of exact spend (up to the HMRC-approved limit), covering meals during qualifying business travel. 
• Expense reimbursement: the employee is paid back the actual amount they spent, supported by receipts. 

What are the UK per diem rates for 2026/27? 

HMRC sets benchmark scale rates for meal allowances that can be paid to employees during qualifying business travel. These are the maximum tax-free amounts you can pay. If you pay more than the benchmark rate without agreeing a bespoke rate with HMRC, the excess becomes taxable. 

For 2026/27, the UK benchmark meal allowance rates remain as follows: 

A couple of things worth knowing here. HMRC doesn’t define rates by breakfast, lunch, or dinner—instead, the rates are based on how long you’ve been travelling and whether you’re working late into the evening. The 24-hour rate of £25 covers the full day, and it can be split across meals however is practical. 

It’s also worth knowing that benchmark scale rates are not mandatory. Organisations can choose to pay less, or can apply to HMRC for a bespoke rate that better reflects their employees’ actual costs. This works well when your teams regularly travel to locations where the benchmark rates don’t quite stretch far enough, but be aware that agreed bespoke rates do require a formal application and some evidence of typical spend. 

You can find the full HMRC guidance on benchmark scale rates on GOV.UK. 

When can employees claim a per diem allowance? 

The qualifying conditions 

Not every work-related meal qualifies. HMRC has specific conditions that must be met for a per diem meal allowance to be paid tax-free. The employee must: 

• Be travelling for work, either as part of their role or to a temporary workplace (not just their regular commute). 
• Be away from their normal place of work or home for more than 5 or 10 continuous hours (depending on which rate applies). 
• Have actually bought a meal or drink during the trip, after the qualifying journey started. 

If all three conditions are met, the per diem rate can be applied without the individual needing to provide a receipt for every item. That said, employees should keep some record that the meal took place during the business trip—a note of the time, location, and rough cost is good practice, even when receipts aren’t strictly required. 

When you can’t claim 

It’s equally important to know when the allowance doesn’t apply. You can’t claim a per diem meal allowance if: 

• No meal or drink was actually purchased. 
• The meal was provided for free. For example, as part of a training course, event, or conference. 
• The meal was eaten at home before leaving or after returning. 
• A meal was included with travel or accommodation (such as a train or flight). 
• The expense included alcohol (this isn’t covered under HMRC’s rules). 
• The journey was a regular commute to a permanent workplace. 

A per diem example 

Meet Jamie. He works for a civil engineering consultancy based in Leeds, and he’s heading down to Bristol for a two-day site visit. 

His company uses HMRC’s benchmark per diem rates for domestic travel. Rather than collecting every receipt, Jamie receives a daily meal allowance based on his journey duration. 

Day one: Jamie leaves home at 6:30am and doesn’t get back to his hotel until 9pm. He’s been travelling and working for well over 10 hours, and he finishes work past 8pm—so he qualifies for the £25 24-hour rate. He grabs breakfast at the train station, buys lunch near the site, and has dinner at a restaurant close to the hotel. He notes the times and locations, just in case HR needs confirmation that the meals happened during the working day. 

He doesn’t try to claim the glass of wine with dinner as he knows alcohol isn’t covered, and he doesn’t claim for the snacks he bought from the hotel minibar, which he knows aren’t part of the allowance. 

Day two: A shorter day. Jamie wraps up by 4pm and is back home by 7pm. His journey was around 5 hours including travel, so he qualifies for the one-meal rate of £5 for lunch. The train home and hotel were booked and paid centrally on the company card, so his per diem only needs to cover meals and incidentals. 

At the end of the trip, Jamie submits his per diem claim through Capture Expense. No envelope stuffed with crumpled receipts. No hunting through his bank statements. Just a quick submission that goes straight to his manager for approval. 

What happens if you go over the HMRC per diem rate? 

This is a question that comes up a lot, so it’s worth getting right. 

If an employee spends more than the benchmark rate (say, they spend £40 on a meal when the daily rate is £25), the employer has two options: 

• Reimburse only the HMRC rate: the company pays £25, and the employee covers the remaining £15 themselves. Clean, simple, and no tax implications. 
• Reimburse the full amount: this is fine, but only if the company has a formally agreed bespoke scale rate with HMRC. If they haven’t, the excess (£15 in this example) is treated as taxable income and is subject to income tax and National Insurance contributions (NICs). 

A lot of organisations don’t realise the second point until it shows up in a PAYE (Pay As You Earn) audit. If your teams regularly travel to high-cost areas like London, major airports, or even international destinations, it’s worth reviewing whether a bespoke rate agreement with HMRC might be a better fit than the benchmark rates. 

How to report per diem payments to HMRC 

How you report per diem payments depends on whether they’re within the HMRC benchmark rates or over them. 

Payments within HMRC benchmark rates 

If you’re paying at or below the benchmark rates, and the qualifying conditions are met, payments can be made tax-free and don’t need to be reported to HMRC. No P11D needed. No additional payroll reporting required. This is one of the main reasons the per diem model is so popular as it genuinely cuts down on reporting admin. 

There’s one caveat: from April 2019, HMRC removed the requirement for employers to check that employees have actually bought a meal. However, employees do still need to have bought a meal for the rate to apply—it’s just that employers are no longer expected to verify every claim. A good expense reporting process will still make sure there’s some basic evidence in place. 

Payments over HMRC benchmark rates 

If you’re reimbursing above the benchmark rates (without a formally agreed bespoke rate), the excess is taxable. In this case, you’ll need to: 

1. Report the excess amount on a P11D form for each affected employee at the end of the tax year. 
2. Complete a P11D(b) to summarise total expenses and calculate any Class 1A NICs due. 
3. Pay any Class 1A NICs owed by 22 July following the end of the tax year (or 19 July if paying by post). 

It’s also worth flagging an important change on the horizon. From April 2027, all benefits in kind—including taxable expense payments—will need to be reported and taxed directly through payroll, rather than via P11D forms. If you’re planning your expense processes now, it’s a good idea to make sure your payroll software and expense platform will be ready for that change. 

You can find the full guidance on reporting expenses and benefits on the HMRC website. 

Common per diem mistakes to avoid 

Even with a simple system, things can go wrong. Here are the most common pitfalls organisations run into with per diem allowances: 

• Paying the allowance without checking qualifying conditions: if the employee’s journey doesn’t meet the 5- or 10-hour threshold, the payment isn’t tax-free. Even if it’s within the benchmark rate. 
• Including alcohol in the claim: it’s an easy mistake, but alcohol isn’t covered under HMRC’s rules. Make sure your expense policy makes this clear. 
• Applying the same rate for all travel: domestic and international rates are different. Using UK rates for overseas trips could leave employees out of pocket—or leave the company overclaiming. 
• Not updating rates when HMRC revises them: HMRC doesn’t always make a big announcement when rates change. It’s worth reviewing your policy at least once a year. 
• Not having a written expense policy: without a clear company expense policy, employees don’t know the rules—and inconsistent claims become much harder to manage. 

Make per diem management simpler 

Managing per diem allowances doesn’t have to mean hours of admin, chasing receipts, or worrying whether your rates are still compliant. With the right tools in place, you can set your rates, automate approvals, and keep everything properly documented—without it taking over your week. 

Capture Expense makes it straightforward to manage travel and subsistence claims, including per diem allowances. Employees can submit claims on the go using the mobile app, managers get clear visibility over what’s being claimed, and your finance team can be confident that everything lines up with your expense policy and HMRC’s rules. 

If you’d like to see how it works in practice, you’re warmly invited to book a personalised demo. No pressure—just a chance to see whether it’s a good fit for your organisation. And if you want to go deeper on related topics, our guides on HMRC meal allowances and subsistence allowance in the UK are a good next step. 

HMRC mileage rates for 2026/27 are 45p per mile for the first 10,000 business miles and 25p per mile thereafter for cars and vans. These rates are unchanged from 2025/26.

What are HMRC mileage allowance payments? 

Mileage Allowance Payments (MAPs) are the amounts you can pay employees, tax-free, when they use their own vehicles for business travel. Rather than reimbursing individual costs like fuel, insurance, or wear and tear separately, HMRC sets a flat pence-per-mile rate that covers it all in one go. 

These are also known as Approved Mileage Allowance Payments (AMAPs). As long as you pay at or below the approved rate, there’s nothing to report to HMRC and nothing to tax. Simple, in principle. 

Why this matters for you 

A lot of organisations don’t realise that underpaying employees—say, reimbursing at 30p per mile rather than the approved 45p—means employees can claim the shortfall back themselves through Mileage Allowance Relief (MAR). That’s an admin burden you’re quietly pushing onto your finance team, all for the sake of a few pence. 

Overpaying, on the other hand? Any amount above the approved rate is treated as a taxable benefit, meaning that it needs to go on a P11D form (or through payroll), and attracts National Insurance contributions. So, it’s worth getting this right. 

What are the HMRC mileage rates for 2026/27?

Good news: the approved mileage allowance rates haven’t changed for 2026/27. They’ve actually been frozen at the same level since April 2011—over 15 years. While that’s a point of growing frustration (more on that below), it does at least mean there’s nothing new to update in your systems this year. 

Here are the current rates from 6 April 2026 to 5 April 2027: 

The two-tier AMAP structure means the rate drops from 45p to 25p per mile once an employee crosses 10,000 cumulative business miles in a tax year.

One quick note: if an employee carries a work colleague in their own vehicle, they can also claim an extra 5p per mile per passenger on top of the standard rate. That’s worth flagging to any employees who regularly car-share for client visits or site travel. 

How to calculate mileage reimbursement 

It’s straightforward. Multiply the miles driven by the relevant rate, applying the two-tier structure for cars and vans once the 10,000-mile threshold is crossed. 

For example: an employee drives 14,000 business miles in their own car over the year. Their reimbursement would be: 

• First 10,000 miles: 10,000 × 45p = £4,500 
• Next 4,000 miles: 4,000 × 25p = £1,000 
• Total: £5,500 

This works well when employees drive a moderate amount. But be aware that for high-mileage employees—those covering hundreds of miles a week—the 25p rate after 10,000 miles may not cover their actual running costs, particularly with fuel prices currently elevated. It’s worth having a conversation about whether your internal policy needs to reflect this. 

A closer look at each vehicle type 

Cars and vans 

The approved rate for cars and vans is 45p per mile for the first 10,000 business miles, then 25p per mile for everything after that. This applies regardless of the engine size, fuel type, or age of the vehicle. 

Importantly, this includes hybrid cars, too. They follow the same 45p/25p structure as petrol and diesel vehicles. So, whether your employee drives a Toyota Prius or a Ford Focus, the rate is the same. 

What about electric vehicles? For employees using their own electric cars for business, the standard AMAP rate of 45p/25p still applies—there’s no separate rate for personally-owned EVs. This is one area where HMRC’s rates are under some scrutiny, since the running costs of EVs are quite different from petrol or diesel vehicles. For now, though, the same rates apply. 

Motorcycles 

Employees using their own motorcycles for business can claim 24p per mile. Unlike cars and vans, there’s no two-tier system. The 24p rate applies regardless of how many miles are driven. There’s no 10,000-mile threshold to manage. 

For example, if an employee travels 6,000 business miles on their motorcycle, that’s 6,000 × 24p = £1,440 in tax-free reimbursement. 

Bicycles 

Yes, cycling for work counts too. The approved rate is 20p per mile, with no mileage limit. It covers things like maintenance, insurance, and general wear and tear. It might sound small, but for employees who regularly cycle between sites or to client meetings, it adds up—and it’s a great incentive to encourage greener travel habits across your organisation. 

What journeys count as business mileage? 

This is where a lot of organisations—and employees—get caught out. Not every work-related journey qualifies for mileage reimbursement. 

Journeys that do qualify: 

• Travelling from one office location to another 
• Visiting a client, customer, or supplier at their premises 
• Travelling to a temporary workplace (a location where an employee works for 24 months or less) 
• Attending a conference, training event, or business meeting away from the usual workplace 

Journeys that don’t qualify: 

• The daily commute from home to a permanent, regular place of work 
• Any travel for private purposes, even if the employee takes a work call on the way 
• Travelling to a location that’s very close to the regular workplace and is effectively still the regular workplace 

Commute errors are a common mistake, and one that HMRC takes seriously. The key distinction is “temporary workplace” versus “permanent workplace”—and HMRC has detailed guidance on this. 

What are the company car and van benefit charges for 2026/27?

If your organisation provides company cars or vans, different rules apply. Employees using a company vehicle don’t qualify for the AMAP rates above—instead, you’ll be working with Advisory Fuel Rates (AFRs) and benefit-in-kind charges. 

Here’s what’s changed for 2026/27, as confirmed in the Autumn Budget 2025 and on GOV.UK: 

These increases are in line with inflation (based on the September 2025 Consumer Price Index figure). It’s worth updating your payroll system to reflect the new figures before the start of the tax year—see our guide to company car and fuel benefit rates for more detail on how these charges are calculated. 

Zero-emission vans still attract a nil rate of tax under the van benefit charge—so if your fleet includes any fully electric vans, those employees won’t face a taxable benefit.  

What are the HMRC advisory fuel rates for 2026/27?

Advisory Fuel Rates (AFRs) are separate from the AMAP rates and apply specifically to company-owned vehicles. They’re used for two purposes: 

1. Reimbursing employees for business travel in a company car 
2. Calculating repayments when employees use the company car for personal travel and need to pay their employer back for the fuel 

HMRC reviews these rates quarterly—usually on 1 March, 1 June, 1 September, and 1 December. Employers can use the previous rates for up to one month after a new set comes into effect, so you do get a short transition window. 

Here are the rates effective from 1 March 2026 set by the government: 

Petrol 

Diesel 

LPG (Liquefied Petroleum Gas) 

(Rates reduced from previous quarter from 1 March 2026) 

Electric vehicles 

The Advisory Electric Rate (AER) is a guideline set by HMRC for reimbursing employees that use electric vehicles (EVs) for business travel. It’s designed to reflect he costs of charging the vehicles and has been split into two categories based on the charging type.

For 2026/27, these are:

The public charging rate increased from 14p to 15p in the March 2026 update, reflecting higher public charging costs. If employees charge their company EVs across both home and public chargers, you’ll need to apportion the mileage accordingly. For VAT purposes, electricity isn’t treated as a fuel for car fuel benefit charges—so fully electric company cars don’t attract the car fuel benefit charge at all. 

Hybrid vehicles are treated as either petrol or diesel for AFR purposes, depending on their engine type. 

The AMAP rate debate: what’s happening? 

It’s worth flagging something that’s generated a lot of discussion in early 2026. The 45p AMAP rate has been frozen since April 2011—and with vehicle running costs having risen significantly since then, there’s growing pressure on the government to increase it. 

In March 2026, MPs debated the issue in the House of Commons following a petition with over 41,500 signatures, with campaigners pointing out that the true cost of running a vehicle is estimated at around 67p per mile—well above the current 45p rate. The Chancellor acknowledged that motoring costs have changed significantly and indicated the government would consider the matter at a future fiscal event. 

So while there’s no change for 2026/27, it’s worth keeping an eye on any announcements in the next Budget. If a rate increase is confirmed, it would most likely take effect from April 2027. 

Common pitfalls to watch out for 

Even organisations with good intentions run into issues with mileage. Here are the most common ones to keep on your radar: 

1. Using the wrong rate for company cars vs personal vehicles. AMAP rates are for employees’ own vehicles. Advisory Fuel Rates are for company cars. Using the wrong set is one of the most common findings during an HMRC Employer Compliance review. 
2. Not tracking cumulative mileage across the year. The 10,000-mile threshold applies across the full tax year, not per trip or per month. If you’re handling this manually, it’s easy to lose track—and overpay at 45p when you should have dropped to 25p. 
3. Accepting commuting claims. Home-to-office travel isn’t eligible, even if the employee also takes a work call during the journey. Make sure your expenses policy is clear on this. 
4. Not keeping adequate records. HMRC can ask to see mileage logs going back several years. Each entry should include the date, start and end point, business purpose, and distance. A log made at the time of the journey carries much more weight than one reconstructed from memory. 
5. Paying above the approved rate without reporting it. If your organisation pays more than 45p per mile, the excess is taxable. It needs to be reported via P11D or through payroll, and Class 1A National Insurance contributions apply. 

If you’re still relying on spreadsheets or paper forms, it might be time to reconsider. Our guide to how mileage reimbursement works covers the process end-to-end. 

How do you report mileage to HMRC?

For most organisations, mileage payments within the approved rates don’t need to be reported at all. But there are situations where reporting is required: 

• If an employee drives more than 10,000 business miles in a year, any payment above 25p per mile for those excess miles must be reported on a P11D form (or payrolled as a benefit). 
• If you pay above the approved rate at any point, the excess is a taxable benefit and needs to be reported accordingly. 
• Employees who receive less than the approved rate can claim Mileage Allowance Relief (MAR) from HMRC directly. If they don’t file a Self Assessment return, they can use form P87—though note that since October 2024, most P87 claims must be submitted by post rather than online. 

You can read more about the P11D reporting process and payrolling benefits in kind in our payroll compliance resources at Cintra. 

Make mileage tracking easier for your organisation 

Tracking mileage manually—across multiple employees, multiple vehicle types, and a 10,000-mile cumulative threshold—can get complicated quickly. The risk of errors, missed thresholds, or inadequate records is real, and the consequences of getting it wrong (whether that’s a tax charge or a failed HMRC compliance check) aren’t worth it. 

Capture Expense automatically calculates mileage based on journey data and HMRC-approved rates. It tracks cumulative mileage across the year, switches rates automatically at the 10,000-mile threshold, supports multiple vehicle types, and keeps a clean audit trail of every claim—ready if HMRC ever asks to see it. 

You can also track carbon emissions alongside mileage, which is increasingly useful for organisations with sustainability reporting requirements. Find out more about tracking CO2 and mileage data together. And if your teams are managing broader expense policies alongside mileage, our expense compliance guide covers everything in one place. 

A new tax year is here—and with it, a fresh set of rates, rules, and updates that affect how you handle expenses. While some are minor adjustments, others are more significant. Either way, now’s the time to make sure your expense policy, your reimbursement processes, and your system settings are all reflecting the right figures. 

For 2026/27, the key expense changes are: van benefit charge up to £4,170, car fuel multiplier up to £29,200, AMAP rates unchanged at 45p/25p, and mandatory BIK payrolling from April 2027.

Advisory fuel rates for company cars 

Advisory fuel rates (AFRs) apply to company cars; approved mileage allowance payments (AMAPs) apply to employees’ personal vehicles—they are different rates for different situations.

While AMAP rates are static, HMRC’s advisory fuel rates for company cars are reviewed every quarter—so these can change throughout the year. The rates effective from 1 March 2026 are: 

Petrol 

Diesel 

Electric 

For hybrid vehicles, HMRC treats them as either petrol or diesel—so apply the relevant rate based on the engine type. 

These advisory rates matter if your employees drive company cars and reclaim fuel costs. Reimbursing above the advisory rate creates a benefit in kind (BIK) liability unless the employee repays the excess. HMRC updates these rates on 1 March, 1 June, 1 September, and 1 December each year—so it’s worth bookmarking and checking them regularly. 

A new tax year is around the corner, and if you provide company vehicles for personal use, now is the time to get up to speed with car fuel benefits. The 2026/27 tax year brings updated rates, revised reporting requirements, and additional changes that employers need to know.  

We’ve put together everything you need to know about the 2026/27 car fuel benefit charge—from what it is, to the latest rates, and how to report to HMRC. It’s time to get into gear! 

What is a car fuel benefit? 

The car fuel benefit applies to UK taxpayers who use their company car for personal journeys and don’t pay for the fuel themselves. This applies to regular commuting too, it’s not just leisure trips that fall under company car fuel benefits.  

Current company cars and vans rates for 2026/27 

Here’s what that looks like for 2026/27: 

What are HMRC’s advisory fuel rates for company cars in 2026? 

The rates below apply from 1 March 2026: 

Diesel  

Petrol  

Electric: rate per mile 

Hybrid 

For advisory fuel rate purposes, hybrid cars are treated as either petrol or diesel vehicles—so apply the relevant petrol or diesel rate based on the engine type. 

Do HMRC regularly update their fuel rates? 

Yes, HMRC reviews advisory fuel rates every quarter to reflect changes in fuel prices. These updates happen on: 

• 1 March  
• 1 June  
• 1 September  
• 1 December  

It’s good practice to keep up to date with these changes so you’re always working with the most current figures. 

How to report company car fuel benefits to HMRC 

You have two options when it comes to reporting your company car fuel benefits: 

• P11D Form: Submit this form at the end of the tax year, along with other benefits. 
• Payroll: Process the car fuel benefit through payroll, deducting tax in real time. 

One update to be aware of is the changes to payrolling benefits. From April 2027,  payrolling benefits will become mandatory.  P11D forms are still valid from 2025/26 and 2026/27, but the deadline is closer than it might feel. If you are currently using P11D forms, it’s worth considering the switch to payroll processing now to stay ahead of the change. 

Tax and Class 1A National Insurance Contributions on car fuel benefits 

Your employees will need to pay income tax on any car fuel benefit they receive. The taxable value is worked out using HMRC’s appropriate percentage, which considers the car’s CO2 emissions. Lower emission cars have a lower percentage and higher emission cards receive a higher percentage—the range runs from 3% to 37%.

Your company also has contributions to make. You’ll need to pay Class 1A National Insurance Contributions on the value of the car fuel benefit provided to your people. 

Mileage tracking is the process of recording the business distances employees drive so they can be accurately reimbursed—covering journey logging, distance calculation, rate application, and HMRC-compliant record keeping. But when you have to manage it across a remote workforce? That’s where most businesses run into trouble. 

When employees work across different cities or away from a fixed office, business journeys become harder to monitor. And if your teams still rely on spreadsheets and email chains to handle it, inflated claims, missed VAT reclaims, compliance risks, and delayed repayments are bound to happen. Want to get mileage tracking right? Look no further! 

This guide covers everything remote teams need to know about mileage tracking: the compliance basics, where manual processes break down, and how automation removes the admin entirely. 

HMRC mileage rules: everything you need to know 

Before diving into the practicalities, let’s first look at what HMRC actually requires when it comes to mileage tracking—because getting this wrong can be costly. 

Approved mileage allowance payments (AMAPs) 

HMRC sets approved rates for reimbursing employees who use their own vehicles for business travel. For the 2026/27 tax year, these are: 

• Cars and vans: 45p per mile for the first 10,000 business miles, 25p per mile after that 
• Motorcycles: 24p per mile 
• Bicycles: 20p per mile 

If you reimburse above these rates, the excess is taxable. If you reimburse below them, employees can claim tax relief on the difference. If you need any more information, you can refer to HMRC’s official guidance. 

What records does HMRC require for mileage tracking? 

To be compliant, every mileage claim should include: 

• The date of the journey 
• Start and end points (that’s actual addresses, not just towns) 
• The purpose of the journey 
• The total miles travelled 
• The vehicle used 

HMRC can request these records during an audit, and incomplete logs can result in disallowed claims and financial penalties. Keeping digital records, that are automatically generated and timestamped, is the safest and most efficient way to stay compliant.

The challenges of mileage tracking for remote teams 

Remote and hybrid working has introduced a new layer of complexity to managing mileage. Here are the most common pain points finance teams encounter:

1. Manual processes are prone to error 

When employees estimate distances themselves or rely on memory at the end of the month, it’s no shock that the figures aren’t accurate. Some underestimate; others overclaim without meaning to. Either way, your reimbursement data ends up unreliable.

2. Commute distance complications 

It is standard practice not to reimburse employees for commuting between home and office. But with remote workers making fewer in-office trips, identifying what counts as a business journey versus a commute becomes more complex. Without automated tools to deduct commute distance from claims, you risk reimbursing journeys that don’t qualify.

3. Cumulative mileage and changing rates 

HMRC’s Approved Mileage Allowance Payments (AMAPs) apply a higher rate for the first 10,000 business miles and a lower rate thereafter. Tracking this threshold manually across a growing remote team—especially one spread across different vehicles and fuel types—can create a significant administrative burden on your finance teams.

4. Missed VAT reclaims

Many businesses don’t realise they can reclaim VAT on the fuel portion of mileage expenses. If your business is VAT-registered, you can recover the VAT element of the advisory fuel rate—but only if you have accurate mileage logs and supporting fuel receipts. Without proper records, that VAT goes unclaimed. 

How VAT Works on Mileage Expenses 

If your business is VAT-registered, you can reclaim the VAT on the fuel element of mileage reimbursements—but only if you have the right records in place. 

HMRC publishes advisory fuel rates quarterly, which vary by fuel type and engine size. These rates represent the fuel cost for each mile driven. Because VAT at 20% means one-sixth of the gross fuel cost is VAT, the reclaimable amount is calculated by dividing the total fuel cost by six. 

To reclaim this VAT, businesses need to maintain accurate mileage logs and retain fuel receipts as evidence. The VAT on the fuel receipts must cover the amount being claimed, and receipts must be dated before the mileage claim is submitted. 

Over a full year, across a remote team making regular business journeys, unclaimed VAT adds up significantly. It is one of the most commonly missed savings in expense management.