Resources

Step 4. Calculate the fuel cost for business use

She multiplies her business miles (see Step 2) by the advisory fuel rate: 

80 miles × £0.15 = £12.00 (fuel cost for this trip). 

If Sarah completes multiple business trips in a month, she repeats this calculation for each journey and then adds the totals together.  

Step 5. Work out how much VAT to reclaim 

VAT is included within the fuel cost, so to extract the reclaimable amount, Sarah divides by 6 (since VAT at 20% means 1/6 of the total price is VAT): 

£12.00 ÷ 6 = £2.00 reclaimable VAT for this trip.

If Sarah drives 1,500 business miles in a month, her VAT calculation would be:

1,500 miles × £0.15 = £225 (total fuel cost).

£225 ÷ 6 = £37.50 reclaimable VAT. 

At the end of the quarter, Sarah includes her VAT mileage claim in her VAT return.  

Are you looking to claim VAT on mileage?

If you need help claiming VAT on mileage or with any other aspect of your travel expenses, book a demo today to see how we can help.  

It doesn’t matter how big your company is or how many employees you have, if you provide company-owned vehicles for personal use, you must stay informed about car fuel benefits.

We will give you everything you need to know from what the car fuel benefit is, to the 2025/26 rates and how to report car fuel benefit to HMRC.

Fasten your seatbelts and let’s get started. 

First things first, what is a car fuel benefit?

To put is simply, the car fuel benefit is applicable to UK taxpayers who use their company car for personal use and don’t pay for the fuel themselves. 
 
It’s also worth noting that normal commuting is classed as personal use for company car fuel benefit purposes. 

What are the company cars and vans rates for 2025/26? 

In the Autumn Statement 2024, the government announced an increase in the van benefit charge, as well as the car and van fuel benefit charges.  

Here are the 2025/26 rates: 

What are HMRC’s advisory fuel rates for company cars in 2025?

Here are the advisory fuel rates set by HMRC for company cars, starting from 1 March 2025: 

Diesel 

 Petrol 

 Electric

 Hybrid

For advisory fuel rates, hybrid cars are considered either petrol or diesel vehicles. 

Do HMRC regularly update their fuel rates? 

HMRC updates the advisory fuel rates quarterly to account for fluctuations in fuel costs. These updates occur on the following dates:

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

How to report car fuel benefits to HMRC 

Your reporting options

1. P11D Form:

Submit this form at the end of the tax year, along with other benefits.

2. Payroll:

Process the car fuel benefit through payroll, deducting tax in real time.

Important update

From 2026, payrolling benefits will become mandatory.  
 
This means that if you are currently using P11D forms you should consider switching to payroll processing now to stay ahead of the change. 

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

Your people must pay tax on any car fuel benefit they receive. The taxable value is calculated using HMRC’s appropriate percentage, which considers the car’s CO2 emissions. Cars with lower emissions are assigned a lower percentage, whereas those with higher emissions receive a higher percentage, varying 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. 

What method is used to calculate the fuel rates? 

Here’s a brief explanation of how HMRC calculates their fuel rates: 

1. Mean MPG calculation: HMRC starts by determining the mean miles per gallon (MPG) based on manufacturers’ data. This figure is adjusted to reflect the distribution of specific models sold to businesses.
    
2. Applied MPG adjustment: the mean MPG is then reduced by 15% to account for real-world driving conditions, recognising that actual fuel efficiency is often lower.
    
3. Fuel price data: HMRC sources the petrol prices from the Department for Business, Energy, and Industrial Strategy, while LPG prices are taken from the Automobile Association website.
    
4. Rate calculation: using the adjusted MPG and current fuel prices, HMRC calculates the advisory fuel rates.
    

By doing all this, HMRC ensures that the advisory fuel rates are accurate and reflective of real driving conditions and fuel costs. Here is the calculation breakdown: 

Diesel 

 Petrol 

 LPG 

 FAQs

Is it worth taking a company car?

Whether an employee should use a company car hinges on how much they drive and spend on fuel. If they rack up a lot of miles and their fuel costs exceed the car’s fuel benefit, it’s a good deal. However, if their fuel expenses are low, they could actually end up paying more with the benefit. 

Choose Capture Expense and manage your company cars and fuel with ease 

Want to see first-hand how our platform streamlines calculations and reimbursements, all while ensuring compliance with HMRC’s advisory fuel rates. Book a personalised demo today; from tracking every mile travelled to controlling spend with business expense cards.

Many employees regularly find themselves on the move, whether it’s visiting clients, attending meetings, or simply commuting to different offices.  
 
With such mobility comes the inevitable cost of transportation, and for many, mileage reimbursement becomes a vital aspect of their employment benefits.  
 
But how does mileage reimbursement work in the UK, you may ask? Read on to find out.

What exactly is mileage reimbursement?

Mileage reimbursement is a way to pay back your employees for using their own cars for work. It covers things like fuel, maintenance, insurance, and general wear and tear. Basically, it’s a way to help with the costs they run up while driving for work.

How does mileage reimbursement work? 

In the UK, mileage reimbursement is often based on a predetermined rate per mile travelled. This rate is set by HM Revenue and Customs (HMRC), and it’s designed to cover the average cost of using a personal vehicle, including fuel, maintenance, and depreciation.
 

The HMRC-approved mileage rates for 2025 for cars are as follows:

• 45 pence per mile for the first 10,000 miles in a tax year 

• 25 pence per mile for each additional mile over 10,000

For motorcycles, the rate is 24 pence per mile, and for bicycles, it’s 20 pence per mile.

These rates are subject to change, so it’s essential that you keep up with the latest guidance from HMRC.

How to calculate mileage reimbursement

To calculate mileage reimbursement, your employees need to multiply the number of miles travelled for work by the applicable rate per mile.  
 
For example, if your employee drives 100 miles for work in a given month, they would be entitled to £45 in reimbursement (100 miles x 0.45 pence). 

How to reimburse your employees

You can pay back employees either through your payroll system or via direct payments.

When using payroll, you incorporate the mileage reimbursement into the employee’s regular pay cycle, ensuring it is clearly itemised on their payslip.

Direct payments can be made outside of the payroll, typically via bank transfer or a company-issued cheque. 

Are there any tax implications?

Mileage reimbursement is typically tax-free, as it’s considered a reimbursement of expenses rather than income. However, there are exceptions, such as when the reimbursement exceeds the HMRC-approved rates or when an employee receives a cash allowance in lieu of reimbursement. In such cases, the excess amount may be subject to income tax and National Insurance contributions.

What responsibilities do you have?

You have a responsibility to ensure that your mileage reimbursement policies comply with HMRC regulations.  
 
This includes: 
 
– Using the approved mileage rates 
– Maintaining accurate records 
– Providing clear guidance to your employees.  
 
Failure to do so can result in penalties and legal liabilities. 

FAQs

Are all UK employees eligible for mileage reimbursement?

Not everyone is eligible for mileage reimbursement in the UK. Generally, you must meet the following criteria:

• You must be using your own vehicle for work-related travel. 

• Your employer must require you to travel for business purposes. 

• You must keep accurate records of your mileage, including the date, destination, and purpose of each trip.

Employees who are eligible for mileage reimbursement typically include sales representatives, delivery drivers, and those who travel between different work locations as part of their job. 

What do UK employees have to do to claim mileage reimbursement?

If you’re eligible for mileage reimbursement, you’ll need to keep detailed records of your business mileage. This includes maintaining a mileage log or using a mileage tracking app to record each journey you make for work purposes. Your mileage log should include the following information:

• Date of the journey 

• Starting location and destination 

• Purpose of the trip 

• Number of miles travelled

Once you’ve accumulated business mileage, you can submit a mileage claim to your employer. This typically involves completing a mileage expense form and attaching your mileage log as evidence. Your employer will then process your claim and reimburse you for the approved mileage. 

Accurate mileage claims guaranteed with Capture Expense

With Capture Expense, your team can raise, submit, and approve vehicle expenses anytime, anywhere, streamlining the way your organisation manages spend. Book your personalised demo now and never miscalculate mileage claims again! 

Filing your VAT return can be a complex process—especially if you’re new to VAT or unsure about the VAT return deadlines.  

VAT returns are due one month and 7 days after the end of each accounting period. For quarterly filers in 2025, deadlines fall on 7 May, 7 August, 7 November, and 7 February 2026.

To make things simple, we’ll walk you through what a VAT return is, the VAT return deadlines, and a step-by-step guide on how to do a VAT return. 

What’s a VAT return?

A VAT return is a document that businesses submit to HM Revenue and Customs (HMRC) to report the value-added tax (VAT) they have charged on sales (output tax) and the VAT they have paid on business purchases (input tax).  

It typically covers a specific accounting period, either quarterly or annually, and allows the business to calculate how much VAT it owes or can reclaim.  

Businesses must file VAT returns even if no VAT is due, and they must do so on time to avoid penalties or interest charges. 

What to include in your VAT return

When you file your VAT return, you’ll need to include:

• Your total sales and purchases. 
• The amount of VAT you owe. 
• The amount of VAT you can reclaim. 
• The amount of VAT you’re owed from HMRC (if you’re reclaiming VAT on business expenses) 

What are the VAT return deadlines?

Here are the quarterly VAT return deadlines for 2025: 

Under the Making Tax Digital (MTD) regulations set by HMRC, all VAT returns must be filed digitally using MTD-compatible software. 

What are the penalties for late VAT submissions and payments?

Penalties for submitting your VAT return late 

If you submit your VAT return late, HMRC has a penalty system based on points. Each time you’re late, you get a penalty point. But a single point alone won’t lead to an immediate fine. 

However, once you hit a certain number of points—called the penalty threshold—you’ll get a fine of £200. After that, every additional late submission will cost you another £200. 

The number of points you’re allowed before getting fined depends on how often you file your VAT return.

Here’s the penalty point threshold for your accounting period:

• Annual submissions → 2 points 
• Quarterly submissions → 4 points 
• Monthly submissions → 5 points 

Penalties for late VAT payments 

If you miss a VAT payment, HMRC has a separate penalty system that works on percentages rather than fixed fines. The longer you take to pay, the more it costs you.

Here’s how it works: 

• 0-15 days late: no penalty at all if you pay or arrange a payment plan within this time. 
• 16-30 days late: you’ll get a 2% penalty based on what you owed on day 15. 
• 31 days late: you’ll be charged:
  – 2% on what you owed on day 15.
  – Another 2% on what you still owe by day 30.

 So, if you haven’t cleared your balance by this point, you’re already at a 4% penalty.

• Beyond 31 days: from day 31 onwards, you’ll be charged an extra 4% per year, calculated daily, until you pay off the full amount. 

How to do a VAT return

Here’s a step-by-step guide on how to do a VAT return: 

Step 1. Know your VAT scheme 

Before you start, it’s important to know which VAT scheme your business falls under. HMRC offers different schemes depending on your turnover and how you prefer to manage your VAT: 

• Standard VAT scheme: you submit a VAT return every quarter, reporting VAT on sales and purchases. 
• Flat rate scheme: designed for small businesses, this lets you pay a fixed percentage of your turnover as VAT instead of working out individual transactions. 
• Annual accounting scheme: you file just one return a year but make advance VAT payments throughout. 

Step 2. Get your documents ready

To avoid last-minute scrambling, make sure you have all the documentation you need: 

• Sales invoices (to calculate VAT collected from customers). 
• Purchase invoices (to work out the VAT you can reclaim). 
• Receipts for business expenses. 
• Records of zero-rated or VAT-exempt sales (if applicable). 

Step 3. Work out how much VAT you owe or can reclaim 

Now, it’s time to crunch the numbers. You’ll need to calculate: 

• VAT on sales (output VAT): the total VAT you’ve charged customers. 
• VAT on purchases (input VAT): the VAT you’ve paid on business-related expenses. 

If your output VAT is higher than your input VAT, you’ll need to pay the difference to HMRC. However, if your input VAT is greater than your output VAT, you can claim a refund for the excess amount. 

Step 4. Use Making Tax Digital software 

Since April 2022, all VAT-registered businesses, regardless of turnover, must submit returns using MTD-compliant software.  

Here are some popular MTD-compatible software: 

• Sage 
• Xero 
• Capium 
• QuickBooks 

Make sure the software you choose integrates well with your existing records and gives you a clear breakdown of your VAT return before submission. 

Step 5. Submit your VAT return 

Once you’ve checked everything, it’s time to file your VAT return.  

Here’s how: 

1️. Log in to your HMRC-approved MTD software.
2️. Link it to your HMRC account (if you haven’t already).
3️. Go to the VAT returns section.
4️. Enter your figures (manually or let your software pull them through).
5️. Review everything carefully (remember mistakes can lead to penalties).
6️. Submit your VAT return and save the confirmation for your records. 

Step 6. Pay your VAT or get a refund 

Once your VAT return is submitted, you’ll either need to pay HMRC or wait for a refund. 

• To pay: you can use a direct debit, bank transfer, or debit/credit card. Make sure you pay by the deadline to avoid penalties. 
• To claim a refund: if you’ve paid more VAT than you owe, HMRC will typically process refunds within 10 working days (as long as there are no issues). 

Never miss VAT return deadlines with Capture Expense 

Capture Expense helps you stay on top of VAT return deadlines by providing auditable reports that give you a clear record of all your transactions—including VAT returns. Book a demo today to see how it works. 

Worried about getting your VAT payments wrong? You’re not alone. But with the right information, it’s easier than you might think. 

Let’s break down the UK VAT rates, what is the vat threshold, and how to calculate exactly what you owe HMRC. 

What are the VAT rates in the UK? 

Here are the current VAT rates in the UK for 2024/2025: 

What goods and services fall under the standard UK VAT rate?

Here’s a list of goods and services that fall under the standard UK VAT rate. For a more comprehensive list, including items that are exempt or outside the scope of VAT, you can visit HMRC. 

What is the vat threshold?

The VAT threshold refers to the minimum level of annual turnover a business must reach before it’s required to register for VAT.  

If a business’s taxable turnover exceeds this threshold, it must charge VAT on its sales and may also reclaim VAT on its purchases. 

What is the vat threshold for 2025? 

The VAT threshold in the UK for 2025 is £90,000. This has increased from £85,000 in April 2024.

Is the VAT threshold reviewed every year?

Yes, the VAT threshold is reviewed annually in the UK. In the past, it typically increased each year, but there was a notable pause from 2017 to 2024 when it stayed the same.

Here’s how the VAT threshold has changed from 2014 to 2025: 

How to calculate how much VAT you owe

Let’s imagine you’re the proud owner of Glow & Co, a VAT-registered business that sells handmade candles in the UK.  

You’ve had a great month, and now it’s time to figure out how much VAT you owe HMRC. 

Step 1: work out your VAT on sales (output VAT)

This is the VAT you’ve collected from customers.  

Let’s say your total sales for the month were £10,000, and you charge the standard VAT rate of 20%. 

VAT collected = £10,000 × 20% = £2,000 

Step 2: work out your VAT on purchases (input VAT)

You can reclaim VAT on your business expenses.  

This month, you bought wax, wicks, jars, and packaging materials for £2,500, and the VAT included in those costs was 20%. 

VAT paid = £2,500 × 20% = £500 

Step 3: calculate the VAT you owe

To find out how much you need to pay HMRC, subtract your input VAT from your output VAT:

£2,000 (VAT collected) – £500 (VAT paid) = £1,500

This means you owe £1,500 in VAT to HMRC for the month. 

Many businesses also manage these costs using a business expense card, making it easier to separate company spending from personal transactions and maintain accurate VAT records.

What if you paid more VAT than you collected? 

Let’s say in a quieter month you only made £3,000 in sales (£600 VAT collected) but had £4,000 in business expenses (£800 VAT paid).

£600 (VAT collected) – £800 (VAT paid) = -£200

In this case, HMRC would owe you £200, which you can reclaim as a VAT refund. 

Simplify and automate your business expenses with Capture Expense 

Our sophisticated app automatically applies the correct VAT rate while giving finance teams better spend tracking and control, keeping your records accurate and fully compliant with HMRC. Book a personalised demo today to see Capture Expense in action. 

Getting your head around the nuances of travel expenses in Ireland can be tricky. It’s like trying to find your way through Dublin for the first time without Google Maps—confusing, frustrating, and if you’re not careful, it could end up costing you more than it should. 

But don’t worry, if you’re an employer in Ireland looking to reimburse your team for work-related travel, you’re in good hands. 

We’ll outline what qualifies as a travel expense in Ireland, when you can reimburse your employees, and how to report it to Revenue. 

What’s a travel expense in Ireland?

Travel expenses in Ireland refer to the costs incurred by an individual or business for work-related travel. These expenses can include:

• Transport costs (e.g., fuel, mileage for personal vehicle use, public transport fares, taxis, flights) 
• Accommodation (e.g., hotel stays for business trips) 
• Subsistence (e.g., meals and incidental expenses while travelling for work) 
• Tolls and parking fees  

For employees, travel expenses may be reimbursed by employers or claimed as allowable expenses for tax purposes, subject to Revenue’s guidelines.  

Reimbursement may be based on actual costs incurred or standard mileage/subsistence rates set by Revenue. 

When can you reimburse your employees for their travel expenses in Ireland?

You can reimburse your employees for travel expenses when they travel for work and the expense is incurred wholly, exclusively, and necessarily for business. 

This includes covering costs like transport, accommodation, and meals if they have to stay away from their usual workplace. If they use their own car, motorcycle, or bicycle for business travel, you can also compensate them based on mileage rates (see below). 

A quick example 

If one of your sales representatives needs to visit multiple client sites across the country, you can reimburse their train fares, hotel stays, and meals.  

Similarly, if an employee drives their own car to attend a conference on behalf of the company, you can cover their fuel costs based on the approved mileage rate. 

How to calculate the distance of a business trip in Ireland

To work out how far your employees travel for work, you’ll need to use the lower of either: 

• The distance between your employee’s home and the temporary place of work. 
• The distance between your employee’s normal place of work and the temporary place of work. 

A real–world scenario

Let’s say one of your employees (Carly) normally works in Dublin city centre but has to travel to Cork for a meeting. 

• The distance from Carly’s home in Bray to Cork is 250 km. 
• The distance from her normal office in Dublin to Cork is 220 km. 

Since the Dublin to Cork route is shorter, that’s the distance used for her travel calculation. 

The travel and subsistence rates in Ireland for 2025 

Now you know the when and how to reimburse your employees’ travel expenses in Ireland, let’s look at the how much. 

Thankfully, Revenue have set very clear guidelines when it comes to travel and subsistence in Ireland. 

Travel 

As we mentioned above, you can reimburse your employees for using their personal vehicles for business journeys. Don’t forget, this doesn’t include commuting from home to their normal place of work. 

You have the option to either reimburse the actual travel expenses incurred by the employee or provide a fixed mileage allowance per kilometre.  

Here are the civil service mileage rates for 2025. 

Subsistence  

When it comes to reimbursing your employees for subsistence expenses, you have three options: 

• Apply the civil service rates: this is the simplest option. You can reimburse your employees using the official civil service subsistence rates set by Revenue. These rates are pre-approved and tax-free.
  
• Set your own rates: alternatively, you can choose to set your own reimbursement rates, but they must not exceed the civil service rates.
• Reimburse actual expenses: another option is to reimburse your employees for the exact costs they incurred during their trip. 

What you need to know about ERR

Since January 1, 2024, new payment reporting rules, known as Enhanced Reporting Requirements (ERR), have come into effect. Here’s what you need to know: 

These rules, introduced under Section 897C of the Finance Act 2022, are designed to improve transparency in how businesses handle certain expenses. However, they also bring some compliance challenges that you’ll need to be aware of.

What needs to be reported 

You’ll need to report specific details about certain payments made to your employees: 

1. Small benefit exemption: you need to record the date the benefit was given and its value. 
2. Remote working daily allowance: report the total number of days covered, the amount paid, and the payment date. 
3. Travel & subsistence payments: for each payment, record the amount and date paid, under these categories: 

• Travel (both vouched and unvouched) 
• Subsistence (both vouched and unvouched) 
• Site-based employees (including ‘country money’) 
• Emergency travel 
• Eating on-site 

How do you report it? 

You must submit these details to Revenue at the time of payment or even before it’s made.  

Reports should be submitted via the Revenue Online Service (ROS), either manually or through your accounting/ERP software. 

Are you looking for a platform that can handle all your travel expenses in Ireland? 

With just a few taps, you can capture receipts, automate employee reimbursements, and effortlessly manage all your travel expenses in Ireland. Book a demo today to see Capture Expense in action.  

Do you know how to make a subsistence allowance claim? Are you familiar with the day and overnight allowance rates in Ireland? If you’re struggling with the civil service subsistence rates, you’re not alone.  

But don’t worry—we’ve got you covered. We’ll walk you through everything you need to know, from what a subsistence allowance is and when you can claim it, to the latest civil service subsistence rates for 2025. 

What’s a subsistence allowance in Ireland? 

A subsistence allowance in Ireland refers to a tax-free payment provided to employees to cover the cost of meals, accommodation, and other daily expenses incurred while travelling for work.  

These allowances, set by Revenue, are based on civil service rates and apply to both public and private sector employees. 

Employers use these rates to reimburse employees for business travel expenses without the need for detailed receipts—provided the trip meets Revenue’s qualifying conditions. 

When can you claim subsistence allowance in Ireland?

If you’re an employee in Ireland, you can claim a subsistence allowance when you meet all of the following conditions: 

1. You had to travel away from your usual workplace. So, if you’re just popping to a different desk in the same office, that won’t count!
2. The travel is necessary for your job. It’s not just about grabbing lunch somewhere different—you must be travelling as part of your work duties.
3. You’ve travelled more than 8km from your normal workplace. This means short trips within the local area usually won’t qualify (also, your regular home-to-work commute doesn’t count).
4. You’ve been away for more than 5 hours. Just running an errand or a short meeting outside the office? That won’t be enough. You need to be away for a significant part of your working day.

Are there any exceptions? 

Yes, not all work-related expenses can be reimbursed by your employer. The key rule is that expenses must be wholly, exclusively, and necessarily incurred for your job.  

If an expense has a personal element or isn’t essential for your work duties, it won’t be covered. 

Here are some common examples of expenses that won’t be reimbursed:

• Family travel costs: if your spouse, partner, or children travel with you for work, their costs won’t be reimbursed.
• Parking or traffic fines: if you get a fine for speeding or illegal parking, you’ll have to pay it yourself.
• Hotel extras: charges for things like laundry, minibar snacks, or personal phone calls. 

What to include in your subsistence allowance claim 

Here’s your checklist for a valid subsistence allowance claim. Make sure you provide full details for each trip separately. 

What are the civil service subsistence rates for 2025?

Here are the civil service subsistence rates set by Revenue:  

Accommodation subsistence rates in Ireland

Day allowances

These are Revenue’s domestic day subsistence rates, effective from 29th January 2025:  

To qualify, your assignment must be at least eight kilometres away from both your home and usual workplace. And if you’re claiming both a day and overnight allowance (see below), you’ll need to work at least five hours the next day. 

Overnight allowance 

Here are the civil service overnight rates, effective from 29th January 2025:  

It’s also worth noting that for vouched accommodation in Dublin, the reimbursable amount is up to €205.53 for accommodation, plus €46.17 for meals. 

What about civil service mileage rates in Ireland?

If you didn’t know already, you can be reimbursed for using your personal vehicle for work-related travel. 

Your employer can either cover your actual travel costs or pay you a fixed mileage allowance per kilometre. The great thing is that Revenue’s civil service mileage rates set clear guidelines for this—making the process really straightforward. 

If, however, you’re just after the civil service motoring and bicycle rates for 2025, then look no further:  

Cars (rate per kilometre)

Motorcycles (rate per kilometre)

Bicycles 

Stay on top of Revenue’s civil service subsistence rates

Whether your organisation uses Revenue’s civil service subsistence rates or sets their own, Capture Expense guarantees that everyone will be reimbursed on time, every time—no exceptions, no mistakes. Book a demo today to see just how easy it is to use. 

Did you know that your employees can claim back hours spent on the road?

Providing mileage allowance for employees who drive for work has become more popular in recent years. However, with HMRC’s many rules and updates, understanding how this process operates can be confusing for both you and your employees. Using expense management software can help businesses simplify mileage tracking, automate claims, and ensure compliance with HMRC requirements.

This blog aims to offer a complete guide on everything you need to know regarding HMRC mileage reimbursement rates in 2025.

What is HMRC’s mileage allowance?

Car allowance mileage rates allow employees to claim back vehicle expenses for business purposes, covering costs like petrol, road tax, and insurance. Instead of individually calculating wear and tear on each vehicle, HMRC uses standard pence per mile expenses called ‘Mileage Allowance Payments’ (MAPs).  
 
This deduction applies to any employee using their vehicle for business. The purpose is to align with tax regulations, ensuring business costs are tax-deductible and not subject to tax when incurred from a personal account. 

How much is the HMRC 2025 mileage allowance?

With the HMRC set mileage allowance, the same rate is applied for every employee, depending on the type of vehicle they use.  

Calculating business mileage is straightforward. All you need to do is multiply the miles travelled by the mileage rate for your vehicle.

For instance, if an employee travels 18,000 business miles in their car, the mileage deduction for the year would be £6,500 (10,000 miles x 45p + 8,000 miles x 25p)

It’s also worth noting that if they travel with colleagues from the same company, the driver can claim an extra 5p per mile per passenger. 

Let’s take a closer look at each milage allowance  

HMRC mileage reimbursement rates for cars and van

The HMRC-approved mileage rate for cars and vans is £0.45 per mile for the first 10,000 miles per year. After that, it’s £0.25 per mile

For example, if your employee drove 19,000 miles for work this year, they’d receive:

• £4,500 for the first 10,000 miles (10,000 x £0.45) 
• £2,250 for the next 9,000 miles (9,000 x £0.25

For a total reimbursement of £6,750

Hybrid cars follow the same standard rates, while electric cars have a fixed rate of £0.05 per mile, with no limit on mileage. 

HMRC mileage reimbursement rates for motorcycles

If your employee owns a motorcycle, they’re eligible to receive £0.24 per mile when driving for business purposes.

Unlike cars and vans, motorcycles are not subjected to the 10,000 miles limit, which means that going above this threshold does not change the 24p rate.

For example, if your employee drove 5000 miles for work this year on their motorbike, they’d receive

£0.24 x 5000 = £1,200 in tax-free reimbursement.  

HMRC mileage reimbursement rates for bicycles

Those who own bicycles might not be paying for fuel, but still incur costs such as insurance, as well as general wear and tear during use. The government recognises this and awards £0.20 per mile for an unlimited amount of business-related mileage.

For example, if your employee cycled 450 miles for eligible business trips this year, they’d receive

£0.20 x 450 = £90 to in tax-free reimbursement. 

What journeys can employees claim mileage on?

Whether your employees drive to work frequently or occasionally, it is worth keeping track of their mileage and understanding what trips qualify to be exempt from taxes, and which do not.

Business journeys employees can claim:

• Travelling from one office to another. 
• Travelling to a temporary location to conduct business (i.e., meeting a client or attending an event).

Business journeys employees can’t claim:

• The daily commute to a permanent office. 
• Travelling to a location very close by. 

• Any travel undertaken for private purposes, even if work-related activities such as making calls or running errands are included.

The only tax-free method for reimbursing business miles is through the approved mileage allowance. Giving an employee a company car or a fixed sum towards petrol will both be taxed, so be aware here.   
 
Other travel expenses like parking charges and road tolls while using a company vehicle are covered under subsistence expenditure, not the mileage allowance. 

Company cars and vans rates for 2025/26

In the Autumn Statement 2024, the government announced an increase in the van benefit charge, as well as the car and van fuel benefit charges.  

Here are the 2025/26 rates and how they’ve changed from 2024/25. 

What are HMRC advisory fuel rates? 

HMRC advisory fuel rates apply to company-owned cars and serve two main purposes:

1. Reimbursing employees for business travel expenses incurred in a company car. 
2. Managing reimbursements when employees use the company car for personal travel and need to repay the business. 

Company car fuel rates are reviewed every three months and can change based on actual fuel rates. You can only rely on the previous rates for up to one month before switching to the current rates.

HMRC fuel rates are influenced by factors like engine size, manufacturer data on miles per gallon, current fuel prices, and the calculated rate per mile

If your employee is using a hybrid car, it’s treated like a petrol or diesel car. But if they’ve got a fully electric vehicle, they are reimbursed at £0.09 per mile. 

The following tables were taken from HMRC. They’re provided with the purpose of breaking down exactly why fuel rates are at their current numbers: 

 Petrol 

Diesel  

LPG (Liquefied Petroleum Gas) 

In reality, only the size of the vehicle’s engine and its equivalent price per mile matter.

Let’s consider an example where your business owns a company car.

The car has a 1000cc petrol engine, an employee pays for fuel for 3000 business miles per year. Additionally, the same employee uses the company car for personal use for 800 miles per year.

Using HMRC’s advisory fuel rates for petrol cars with engines up to 1400cc at £0.12 per mile:

• £0.12 x 3000 miles = £360 for business use. 
• £0.12 x 800 miles = £96 for personal use.
   

Therefore, your business can claim £360 from HMRC through the fuel advisory for 2025, and you can also recoup £96 from the employee for personal use. 

FAQs 

What vehicles are eligible for mileage allowance? 

Employees are eligible to receive mileage allowance payments for any vehicle they own and have registered with the DVLA, such as cars, vans, motorcycles, scooters, and bicycles, provided these vehicles are used for work purposes. 

When do you need to report HMRC mileage reimbursement rates?

If an employee travels over 10,000 miles, you must report it to HMRC using form P11D. Paying employees more than the approved amount of 45p per mile is also considered a benefit and must be reported on a P11D and taxed. 

What’s the best way to reimburse your employees in 2025? 

Tracking and calculating individual mileage allowances for employees, especially for SMEs with company cars, can be tedious. However, expense management software like Capture Expense, uses accurate reimbursement features to simplify this process by automatically calculating mileage based on journey data and HMRC figures, saving time and effort.

Ready to streamline your mileage allowance process?

Book a demo with Capture Expense today and discover how our software simplifies tracking, calculating, and reimbursing mileage while ensuring compliance with HMRC mileage reimbursement rates.  

A travel expense policy is more than just a list of what your employees can or can’t spend money on, while on the road. 

With the right policy you can simplify your travel and expenses (T&E) reimbursement process, streamline workflows, and set clear spending limits. These are just some of the ways a robust policy can help. The list goes on and on. 

If you’re new to the T&E game, you’re in good hands. We’ll provide you with a clear description of what a travel expense policy is, our guidelines to bear in mind when creating a policy, and our free template to help you get started. 

What is a travel expense policy? 

A travel expense policy is a set of guidelines established by an organisation to regulate and manage costs incurred by employees during business-related travel. There’s no one-size-fits-all policy, because it needs to align with your organisation’s size, needs, and travel history. But a thorough T&E policy outlines:

Booking guidelines 

• Instructions on how, where, and when to book travel. 
• Approved travel management platforms or expense management apps that can handle travel expenses. 
• List of preferred suppliers for travel and accommodation.

Expense coverage

• Clear identification of reimbursable expenses (e.g., transportation, meals, and accommodation). 
• Specification of non-deductible expenses (to avoid confusion later down the line).

Spending limits

• Maximum allowable amounts for various expense categories, such as daily meal allowances or hotel rates.

Reimbursement process

• Step-by-step instructions for submitting expense claims, including required documentation (receipts, travel log etc.). 
• Expected timelines for reimbursement.

Payment methods

• Guidance on using corporate cards, cash advances, and out-of-pocket expenses.

Approval process

• Details of the approval hierarchy for travel requests and out-of-policy bookings.

Is there anything missing from your travel expense policy?

If you think your travel expense policy is missing something, then it probably is.

Ask yourself the following questions (and update your policy if you need to):

• Are there specific times when business travel isn’t allowed, such as during an audit or public holidays?
• What steps will be taken to deal with non-compliance with the policy?
• What guidelines should be in place if someone wants to extend their business trip for personal leave?
• How will the team handle unexpected events, like Acts of God or emergencies? Do employees know who to contact for help?
• Who’s responsible for keeping the travel policy up to date? How often should it be reviewed? 

Not sure whether you need a travel expense policy? 

From the moment you authorise your first business trip, you’ll need a travel expense policy. You should’ve had one in place before that first trip was even booked—but you get the idea. 

Ultimately, the choice is yours. However, after hearing countless stories of business trip mishaps, we’ve concluded that when it comes to travel expenses, what can go wrong, will probably go wrong.   

Here are just some of the things you expose yourself to when you don’t have a travel expense policy: 

• Overspending due to hidden costs that slip through the cracks.
• Late or incomplete expense claims, when employees aren’t clear on the guidelines—or forget to follow them.
• An increase in fraudulent claims, including duplications, exaggerations, and misreporting of expenses, which can go unnoticed without clear rules in place.
• A lack of insights into your company’s spending trends, since without a standard way of tracking and storing expenses, it’s hard to analyse and control your costs effectively. 

5 guidelines to keep in mind when creating your travel expense policy 

1. Involve key stakeholders

Your travel expense policy will touch nearly every employee and department within your organisation. That’s why it’s important to bring different perspectives and expertise to the table from the very beginning.

You need to make sure you get input from your:  

• Finance teams: as they’ll make sure the policy aligns with your budget and compliance requirements.
• HR department: they can provide insight into employee needs and expectations.
• Travel department: they can highlight logistical challenges and suggest practical solutions.

2. Consider employee satisfaction

At the end of the day, your employees are the ones who will be following your travel expense policy. If the policy feels too restrictive or confusing, it can lead to frustration, delays in submitting expenses, and lower morale.  
 
A policy that takes your employees’ needs into account—like allowing some flexibility for reasonable expenses—shows that you value their comfort and judgment. 
 
Don’t forget, happy employees are more likely to stick to the rules.

3. Incorporate an understanding of duty of care

Duty of care is all about looking out for your employees’ safety and well-being while they’re travelling for work.  

Business trips can come with unexpected risks—flight cancellations, unsafe accommodations, or emergencies—and your travel and expenses policy should reflect that you’re prepared to support your employees when it matters most.

A good policy should give clear advice on anticipating, preventing, and responding to potential issues that might arise while employees are on the move.

The goal is to minimise risks by recognising and preparing for them in advance. And if something does go wrong, your policy will outline practical solutions to manage the situation. 

4. Provide easily accessibly resources 

A well-crafted policy goes beyond listing the dos and don’ts. You should consider including the following resources: 

• The policy document: a clear, detailed copy of the travel and expenses policy, ideally available in both digital and printable formats for easy reference.
• Expense claim forms: standardised forms for submitting expenses, whether in digital or printable formats, along with instructions on how to fill them out.
• Reimbursement process overview: a step-by-step guide explaining how to submit claims, what documentation is required, and how long reimbursements typically take.
• Approved vendor list: a list of preferred airlines, hotels, car rental companies, and other vendors.
• Contact information: details of who to reach out to with questions or for assistance, such as the finance or travel management team.
• Training materials: videos, presentations, or workshops explaining the policy and providing examples of how to follow it correctly.
• Expense tracking tools: links or instructions for accessing company-approved expense management software for tracking expenses during trips.
• Policy updates notifications: a process or platform where employees can check for updates to the policy to make sure they’re always informed of the latest guidelines. 

5. Practice continuous improvement

Regularly updating and improving your travel and expense policy is crucial because things change—whether it’s new technologies, shifts in industry standards, or changes in your company’s needs.  
 
By keeping your travel & expense policy up to date, you can make sure it stays relevant and effective.
 
Plus, it gives you the chance to address any issues that have come up, refine areas that might be causing confusion, and adapt to new challenges.  

Capture Expense is here to  support  you every step of the way 

We know that creating a travel policy from scratch takes time, and it can be overwhelming at first. To help you get started you can download our free travel expense policy template.
 
Or, if you want to see how we can streamline your entire T&E process, book a demo here.