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.
This blog aims to offer a complete guide on everything you need to know regarding HMRC mileage reimbursement rates in 2024.
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 2024 mileage allowance?
With the HMRC set mileage allowance, the same rate is applied for every employee, depending on the type of vehicle they use.
| Type of vehicle | 10,000 miles | 10,000 + miles |
| Cars and vans | 45p | 25p |
| Motorcycles | 24p | 24p |
| Bikes | 20p | 20p |
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.
What are HMRC advisory fuel rates?
HMRC advisory fuel rates apply to company-owned cars and serve two main purposes:
- Reimbursing employees for business travel expenses incurred in a company car.
- 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 and have been in place since 1st December 2023. They’re provided with the purpose of breaking down exactly why fuel rates are at their current numbers:
Petrol
| Engine size (cc) | Mean MPG | Fuel price (per litre) | Fuel price (per gallon) | Rate per mile | Advisory fuel rate |
| Up to 1400 | 49.5 | 152.4 pence | 692.8 pence | 14.0 pence | 14 pence |
| 1401 to 2000 | 42.1 | 152.4 pence | 692.8 pence | 16.5 pence | 16 pence |
| Over 2000 | 26.7 | 152.4 pence | 692.8 pence | 26.0 pence | 26 pence |
Diesel
| Engine size (cc) | Mean MPG | Fuel price (per litre) | Fuel price (per gallon) | Rate per mile | Advisory fuel rate |
| Up to 1600 | 56.7 | 160.4 pence | 729.1 pence | 12.9 pence | 13 pence |
| 1601 to 2000 | 48.0 | 160.4 pence | 729.1 pence | 15.2 pence | 15 pence |
| Over 2000 | 36.3 | 160.4 pence | 729.1 pence | 20.1 pence | 20 pence |
LPG (Liquefied Petroleum Gas)
| Engine size (cc) | Mean MPG | Fuel price (per litre) | Fuel price (per gallon) | Rate per mile | Advisory fuel rate |
| Up to 1400 | 39.6 | 86.7 pence | 394.1 pence | 10 pence | 10 pence |
| 1401 to 2000 | 33.7 | 86.7 pence | 394.1 pence | 11.7 pence | 12 pence |
| Over 2000 | 21.3 | 86.7 pence | 394.1 pence | 18.5 pence | 18 pence |
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 £0.14 per mile:
- £0.14 x 3000 miles = £420 for business use.
- £0.14 x 800 miles = £112 for personal use.
Therefore, your business can claim £420 from HMRC through the fuel advisory for 2024, and you can also recoup £112 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 2024?
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.