Mileage and Travel Expenses: HMRC Rates and How to Claim

Navigating the complexities of business expenses can be daunting, but understanding how to properly claim mileage and travel costs is essential for reducing your tax bill and ensuring compliance with HMRC regulations. Whether you're a sole trader, a limited company director, or an employee, knowing what you can claim and how to do it correctly can save you significant money. This comprehensive guide will break down everything you need to know about mileage and travel expenses in the UK for the 2026/27 tax year.

Understanding HMRC Mileage Rates

The most common way to claim vehicle expenses is through the HMRC's Approved Mileage Allowance Payments (AMAP). These are flat rates per mile that you can claim without needing to calculate the actual costs of fuel, wear and tear, and maintenance. These rates are designed to cover all vehicle running costs, except for tolls and parking, which can be claimed separately.

Approved Mileage Allowance Payments (AMAP)

For the 2026/27 tax year, the AMAP rates remain consistent with previous years, providing a clear framework for claiming business travel in personal vehicles [1].

Passenger Payments

If you carry fellow employees in your car or van on journeys that are also work journeys for them, you can claim an additional 5p per passenger per business mile. This is known as a passenger payment and is tax-free [1].

Electric Vehicle Mileage Rates

The rise of electric vehicles (EVs) has introduced new considerations for mileage claims. For personal electric cars, the standard AMAP rates (45p/25p) apply, just as they would for petrol or diesel cars. However, for company electric cars, HMRC provides Advisory Electric Rates (AER) which are updated quarterly [2]. These rates differentiate between home charging and public charging to reflect the varying costs.

What Counts as Business Mileage?

Understanding what HMRC considers business mileage is crucial for accurate claims. Generally, business mileage refers to journeys made wholly and exclusively for business purposes [3].

Eligible Business Journeys

• Travel between temporary workplaces (e.g., client sites, different offices).
• Trips to attend business meetings, conferences, or training courses.
• Journeys to deliver goods or services.
• Travel between two different permanent workplaces if you have more than one.

Non-Eligible Journeys (Commuting)

A common misconception is that commuting to and from your regular place of work counts as business mileage. HMRC generally views this as ordinary commuting, which is not an allowable expense. The key distinction is often whether you are driving 'on the job' (eligible) versus driving 'to the job' (not eligible) [3].

Methods of Claiming Mileage

When it comes to claiming vehicle expenses, you generally have two main options: using the simplified mileage rate method or claiming actual costs. The best method for you will depend on your individual circumstances and the level of detail you keep in your records.

Mileage Rate Method (Simplified Expenses)

This method, often referred to as simplified expenses, allows sole traders and partnerships to claim a flat rate per business mile, as outlined in the AMAP rates. It simplifies record-keeping as you don't need to track every single vehicle-related expense [4].

Actual Cost Method

With the actual cost method, you claim a proportion of all your vehicle-related expenses based on your business mileage percentage. This can include a wide range of costs [5].

• Fuel and oil
• Insurance
• Repairs and servicing
• MOTs
• Road tax (Vehicle Excise Duty)
• Breakdown cover
• Depreciation (or capital allowances for company vehicles)

Choosing the Right Method

For most small businesses and self-employed individuals with lower mileage, the simplified expenses method is often more straightforward and sufficient. However, if you have a high-mileage vehicle, a particularly expensive vehicle to run, or significant repair costs, the actual cost method might result in a larger claim. It's advisable to compare both methods, especially in your first year of business, to see which yields a better tax deduction [4].

Other Travel Expenses

Beyond vehicle mileage, HMRC allows you to claim a variety of other travel-related expenses, provided they are incurred wholly and exclusively for business purposes [6].

Public Transport Costs

• Train fares
• Bus fares
• Taxi fares (including ride-sharing services like Uber for business journeys)
• Air fares

Always keep receipts or booking confirmations for these expenses.

Hotel Accommodation

If you need to stay overnight for business purposes, the cost of hotel accommodation is an allowable expense. This includes the room rate and any reasonable associated costs, such as Wi-Fi or a modest breakfast [6].

Food and Drink (Subsistence Rates)

You can claim for reasonable costs of food and drink (subsistence) while on business trips, especially if you are away from your normal place of work for an extended period or staying overnight. HMRC does not publish official subsistence rates for self-employed individuals, but expects claims to be reasonable and backed by receipts. For employees, employers can pay benchmark scale rates tax-free, but these are not directly applicable to the self-employed [7].

Other Allowable Travel Costs

• Congestion charges and tolls (e.g., Dartford Crossing, M6 Toll)
• Parking fees
• Ferry costs

These expenses can be claimed in addition to mileage allowances.

Keeping a Mileage Log

Regardless of whether you use the mileage rate method or actual costs, maintaining an accurate and detailed mileage log is paramount. HMRC can request to see your records, and without proper documentation, your claims could be disallowed [8].

What to Include in a Mileage Log

• Date of Journey: When the trip took place.
• Start and End Destination: The addresses or clear descriptions of where the journey began and ended.
• Purpose of Journey: A brief explanation of why the trip was business-related (e.g., "Client meeting - XYZ Ltd", "Deliver goods to warehouse").
• Total Mileage: The distance covered for the business portion of the journey.
• Vehicle Used: Make and model, or registration number.

Manual vs. Digital Logging

You can keep a mileage log manually using a notebook or a spreadsheet. However, digital solutions offer greater convenience and accuracy.

Mileage Tracking Apps and Software

Modern technology has made mileage tracking significantly easier. Dedicated apps and features within accounting software can automate much of the process, ensuring you capture every eligible mile.

Popular Mileage Tracking Apps

• TripLog: Offers automatic mileage tracking, expense logging, and IRS/HMRC compliant reports.
• MileIQ: Uses smart drive detection to automatically log and classify business drives.
• Everlance: Combines mileage tracking, expense management, and revenue tracking.

Integrated Accounting Software Features

Many popular accounting software solutions for small businesses in the UK include built-in mileage tracking features, streamlining your expense management [9] [10].

• QuickBooks: Offers mileage tracking through its mobile app, allowing you to categorize trips and generate reports.
• FreeAgent: Provides robust expense management, including mileage tracking, directly integrated into its accounting platform.
• Xero: While not having a dedicated mileage tracker, Xero integrates with many third-party mileage apps, allowing for seamless data import.

Conclusion

Accurately claiming mileage and travel expenses is a vital part of managing your business finances effectively and remaining compliant with HMRC. By understanding the approved rates, distinguishing between business and personal travel, and maintaining diligent records, you can ensure you're not overpaying tax and are making the most of available allowances. Embrace digital tools to simplify the process and keep your financial records in impeccable order.