Employers and employees should be aware of HMRC’s rules regarding Mileage Allowance Payments (MAPs), the payments made to employees using their personal vehicles for business journeys. These payments can be tax-free up to certain approved rates, helping employees reclaim travel costs without facing tax liabilities.
The approved tax-free amount is calculated by multiplying the miles driven for business purposes by the applicable mileage rate. For car journeys, HMRC allows employers to pay 45p per mile for the first 10,000 miles annually, and 25p per mile thereafter. These rates represent the maximum allowance employees can receive without incurring tax charges.
Companies do not need to report MAPs paid at or below these rates to HMRC. If employees receive less than the statutory mileage rate, they may claim tax relief on the difference to recover some costs.
Key criteria determine what qualifies as a business journey eligible for these allowances:
- The trip must be necessary for the employee’s professional duties, such as visiting clients or attending meetings.
- Travel must be to a location other than the employee’s permanent workplace.
Importantly, ordinary commuting between home and a permanent workplace is not considered business travel and does not qualify for MAPs. This also applies to hybrid workers unless the home is officially their permanent workplace. In cases where the workplace is temporary, travel to and from that site may qualify for business mileage allowances under different rules.
By understanding these guidelines, both employers and employees can ensure correct reimbursement and maximize tax-free mileage payments.