Every transport business has drivers and managers who sometimes use their own vehicle for work - the supervisor’s car on a site visit, the fitter’s van fetching parts, the office manager driving to a customer meeting. When an employer covers the cost of an employee using their own vehicle for business travel, HMRC’s mileage scheme decides what can be paid tax-free, what must be reported, and what tax relief the employee can claim. The rates moved in April 2026, so any policy written before then is out of date.
The scheme works through an “approved amount” per business mile, above which tax and reporting bite and below which relief is available. The current rates for cars and vans: 55 pence per mile for the first 10,000 business miles in the tax year (up from 45p before 6 April 2026), then 25 pence per mile above 10,000 miles. Motorcycles sit at 24p per mile regardless of distance, and bicycles at 20p. Electrically assisted pedal cycles count as bikes; other electric bikes count as motorcycles.
Two structural points matter. First, it does not matter if the employee uses more than one vehicle in the year - the mileage is all calculated together. Second, the rates are per employee, not per vehicle or per job: the 10,000-mile threshold follows the person.
HMRC’s own worked example: an employee travelling 12,000 business miles in their car in a year has an approved amount of £5,000 (10,000 miles at 45p plus 2,000 miles at 25p, in the example as originally published). Scale that to current rates and the shape is the same: the first ten thousand miles at the higher rate, the remainder at the lower.
If you pay more than the approved amount, the excess is effectively pay: report it on form P11D, add it to the employee’s pay, and deduct and pay tax as normal. Overpaying mileage is not a perk; it is salary with extra paperwork.
If you pay less than the approved amount - or nothing at all - the employee can claim tax relief on the unused balance, called Mileage Allowance Relief (MAR). There is also an employer-side option: the Mileage Allowance Relief Optional Reporting Scheme (MARORS) lets you make separate optional reports to HMRC of those unused balances, which smooths the process for employees. Joining it is a contact-HMRC step, not an automatic enrolment.
The whole system runs on business mileage records: who drove, where, why, how far. The rate is generous enough to be worth paying properly and documented enough to be worth recording properly.
Fleet operators sometimes assume mileage rules are for other industries - we have the trucks; why would anyone drive their own? In practice the grey fleet is everywhere in a transport business: management travel, emergency parts runs, training days, the weekend dash to a broken-down unit. Each of those miles sits inside this scheme, and the failure modes are familiar:
A word on what counts as business travel, because the boundary drives everything: ordinary commuting between home and a permanent workplace is not business mileage, and paying mileage for it is paying taxable income. Journeys between sites, to customers, to training, and to temporary workplaces are the material the approved amount exists for. Write the definition into the expense policy so claims start from the right side of the line.