HMRC Mileage Rates 2025 | Key Changes and How to Claim

As a business owner or employee in the UK, understanding the HMRC mileage rates is essential when claiming expenses for work-related travel. Whether you’re driving your own car for business purposes or managing employee reimbursements, these rates directly impact how much you can claim tax-free.

With the HMRC mileage rates for 2025 now updated, staying informed about the changes is crucial for maintaining compliance and maximising your reimbursement.

In this guide, I’ll break down the 2025 HMRC mileage rates, key changes, and how you can claim expenses efficiently, ensuring you stay on top of HMRC regulations.

What Are the HMRC Mileage Rates for 2025?

HMRC mileage rates are the official rates set by HMRC to reimburse employees or self-employed individuals for using their personal vehicles for business-related travel.

These rates apply to cars, vans, motorcycles, and even bicycles, making it easier to calculate travel expenses without complicated tax calculations.

Approved Mileage Rates for 2025

Detailed Explanation of the Rates:

1. Cars and Vans:

• For the first 10,000 business miles, the reimbursement rate is 45p per mile. This includes fuel, vehicle wear and tear, and other operational costs.
• After 10,000 miles, the rate reduces to 25p per mile to account for incremental cost savings over long distances.

2. Motorcycles:

• Flat rate of 24p per mile for all distances, reflecting lower operating costs compared to cars or vans.

3. Bicycles:

• A flat rate of 20p per mile, designed to encourage environmentally friendly travel options like cycling.

What Does This Cover?

The mileage rates include expenses for:

• Fuel
• Insurance
• Maintenance and servicing
• General wear and tear of the vehicle

However, it’s essential to note that these rates only apply to business travel. Commutes between home and your regular workplace are excluded.

How Do HMRC Mileage Rates Work?

Understanding how these rates work is essential to ensure accurate claims and avoid tax issues. The mileage rates are designed to provide tax-free reimbursement for individuals using their vehicles for work-related journeys.

Key Points to Understand:

1. Tax-Free Allowance:

• If an employer reimburses employees using the approved mileage rates, the payments are tax-free.
• If the reimbursement is below the HMRC rates, employees can claim the difference as tax relief.

2. Eligible Journeys:

• Only business-related trips qualify for mileage claims.
• Examples include visiting clients, attending meetings, or travelling between work sites.

3. Non-Eligible Journeys:

• Commuting between home and a regular workplace is not eligible for mileage reimbursement.

Example Calculation

If you drive 5,000 business miles in a year using your car:

• For the first 5,000 miles: 5,000 x 45p = £2,250 tax-free reimbursement.

If you exceed 10,000 miles:

• Additional miles are reimbursed at 25p per mile.

This method ensures fair compensation without unnecessary complexity.

What Are the Key Changes in Mileage Rates for 2025?

For 2025, HMRC has not introduced major changes to the mileage rates. However, several contextual factors make understanding the current rates more important than ever.

Key Updates for 2025

1. Stagnant Rates:: The rates (45p, 25p, 24p, and 20p) remain unchanged from 2024, despite increases in fuel costs and vehicle maintenance expenses.
2. Electric Vehicles:: Separate advisory rates, known as the Advisory Electric Rate (AER), remain in place for electric cars. However, they are not integrated into the general mileage rates.
3. Focus on Compliance: HMRC has heightened its focus on ensuring businesses and individuals comply with mileage claim rules, requiring detailed documentation and accurate reporting.

Why Do These Changes Matter?

The unchanged rates, despite inflation and rising fuel costs, mean businesses and employees must optimise their travel habits to manage costs effectively. Additionally, compliance is now more critical than ever, with stricter HMRC audits in place.

How Can You Claim Mileage Expenses From HMRC?

Claiming mileage expenses might seem complex, but with the right approach, you can ensure accuracy and compliance. Here’s a detailed guide to help you navigate the process.

Steps to Claim Mileage Expenses

1. Track Your Mileage:

• Record every business trip in a logbook or mileage tracking app.
• Include details such as the date, purpose, destination, and distance travelled.

2. Check HMRC’s Approved Rates:

• Make sure your claim aligns with the current HMRC mileage rates for 2025.

3. Submit Your Claim:

• Employees: Submit your mileage records to your employer for reimbursement.
• Self-Employed: Include mileage expenses in your self-assessment tax return.

4. Maintain Supporting Documents:

• Keep receipts for fuel, servicing, and other vehicle expenses to back up your claims.

Are There Different Rates for Company Cars and Personal Vehicles?

Yes, HMRC mileage rates differ depending on whether a vehicle is personally owned or a company car. These rates account for the specific costs and responsibilities associated with each vehicle type, including maintenance, fuel, and wear and tear.

For 2025, the mileage rates remain unchanged from 2024, and in fact, these basic rates have not been revised for over 13 years. Here’s a breakdown of what to expect.

Cars and Vans: Mileage Rates for Personal Vehicles

When employees use their personally owned cars or vans for business purposes, they can claim reimbursement based on the mileage rates set by HMRC. For 2025, the rates are as follows:

• 45p per mile for the first 10,000 miles covered in a year.
• 25p per mile for every mile beyond the first 10,000.

These rates are designed to cover expenses such as fuel, insurance, maintenance, and general wear and tear. It’s worth noting that these same rates apply to personally owned electric cars, ensuring fair compensation for business travel using sustainable vehicles.

The HMRC 10,000-Mile Threshold

For cars and vans, HMRC applies a 10,000-mile threshold to the reimbursement rate. During the first 10,000 business miles in a tax year, employees are reimbursed at the higher rate of 45p per mile. Once this threshold is exceeded, the reimbursement rate drops to 25p per mile for every additional mile.

Company Cars

Reimbursement for company cars is handled differently. Rather than the standard AMAP (Approved Mileage Allowance Payments) rates used for personal vehicles, company car mileage is reimbursed using Advisory Fuel Rates (AFRs). These rates are based on the vehicle’s engine size and fuel type and are updated quarterly by HMRC to reflect changes in fuel costs.

Here are the AFRs for company cars in 2025 (as of January):

Electric Company Cars

As of 1 September 2024, the advisory fuel rate for electric company cars is set at 7p per mile for all engine sizes. This lower rate reflects the reduced cost of charging electric vehicles compared to fuelling traditional petrol or diesel cars.

Motorcycles

The HMRC mileage rate for motorcycles remains at a flat 24p per mile, regardless of the total distance covered. This rate applies only to personally owned motorcycles used for business travel.

Bicycles

For environmentally conscious employees who use bicycles for business journeys, HMRC offers a mileage rate of 20p per mile, covering all distances. This rate supports sustainable travel and promotes the use of bicycles for work-related journeys.

Summary of Rates for 2025:

What is the Impact of Mileage Rates on Businesses?

Mileage rates have a direct impact on business expenses, employee satisfaction, and tax compliance.

How Businesses Are Affected?:

1. Cost Management: Companies must budget for employee mileage reimbursements, ensuring they don’t exceed or fall short of the approved rates.
2. Compliance: Accurate mileage tracking is essential to avoid over-claiming or under-claiming, which could lead to HMRC penalties.
3. Efficiency Tools: Many businesses now use mileage tracking software to automate claims, improve accuracy, and save administrative time.

What Happens if Your Employer Pays Less Than the Hmrc-approved Mileage Rates?

In some cases, employers may choose to reimburse employees at a rate lower than the HMRC-approved rates. While this is legal, it can leave employees out of pocket unless they take additional steps to recover the shortfall.

How to Claim the Difference?

If your employer reimburses you at a lower rate, you can claim the difference as tax relief directly from HMRC. This process ensures you receive the full tax-free allowance. Here’s how it works:

1. Calculate the Shortfall: Subtract the amount reimbursed by your employer from the HMRC-approved rates (e.g., 45p per mile for the first 10,000 miles).

2. Claim via a P87 Form or Self-Assessment:

• Use the P87 form for small claims (less than £2,500).
• Include mileage claims in your self-assessment tax return for larger claims.

3. Provide Supporting Records: HMRC may request evidence, so ensure you keep detailed mileage logs and employer reimbursement records.

Example:

If your employer reimburses you at 35p per mile instead of 45p, and you drive 8,000 business miles in a year:

• HMRC-approved rate: 8,000 x 45p = £3,600
• Employer reimbursement: 8,000 x 35p = £2,800
• Difference: £3,600 – £2,800 = £800

You can claim this £800 as tax relief, reducing the amount of tax you owe.

Are There Mileage Rates for Electric Vehicles in 2025?

As the UK transitions towards a greener future, electric vehicles (EVs) are becoming more common. However, the standard HMRC mileage rates don’t explicitly include EVs. Instead, HMRC provides a separate reimbursement structure known as the Advisory Electric Rate (AER) for company cars.

Understanding the AER for Electric Cars

The AER is set at 9p per mile in 2025 and applies to employees who drive company-owned electric vehicles for business purposes. This rate is reviewed quarterly to reflect changes in electricity costs.

What About Personal Electric Vehicles?

If you use a personal electric vehicle for business travel, you can claim the same mileage rates as petrol or diesel cars (e.g., 45p per mile for the first 10,000 miles). This is because the standard mileage rates are all-inclusive and account for all operating costs, including electricity.

Charging Costs and Reimbursement

1. Company Cars: Employers may cover the cost of charging a company EV at home or reimburse the electricity costs for business-related travel. However, these reimbursements must align with the AER to remain tax-free.
2. Personal Vehicles: Drivers of personal EVs cannot claim additional charging costs, as the 45p-per-mile rate already accounts for these expenses.

The Benefits of EVs for Business Travel

• Cost Savings: Lower running costs compared to petrol or diesel vehicles.
• Environmentally Friendly: Reduced carbon emissions contribute to sustainability goals.
• Government Incentives: EV drivers may benefit from grants, tax exemptions, and other incentives.

How Can You Stay Compliant With HMRC Guidelines?

Compliance is non-negotiable when it comes to mileage claims. Following HMRC’s guidelines not only avoids penalties but also ensures accurate reimbursements.

Tips for Staying Compliant

1. Use a reliable system for tracking mileage, such as logbooks or apps.
2. Double-check all claims against HMRC-approved rates.
3. Retain records, including receipts and logs, for at least five years.
4. Stay informed about any HMRC updates or changes to mileage policies.

Conclusion

The HMRC mileage rates for 2025 remain a valuable tool for calculating tax-free travel reimbursements. While there are no major changes this year, understanding these rates and how to claim them ensures compliance and financial efficiency.

By keeping accurate records, staying informed, and leveraging available tools, you can maximise your reimbursement and focus on your business goals without worrying about HMRC penalties.

FAQs About HMRC Mileage Rates 2025

What happens if I exceed the approved mileage rates?

Any amount paid above the HMRC-approved mileage rates is considered taxable income and must be declared to HMRC.

Can I claim mileage for commuting to work?

No, commuting between your home and workplace does not qualify as business mileage.

What records should I keep for HMRC mileage claims?

You should keep a detailed log of business trips, including dates, destinations, purpose, and mileage covered. Receipts for fuel and maintenance are also recommended.

Are there separate rates for electric vehicles in 2025?

Electric vehicles fall under the Advisory Electric Rate (AER), which is calculated separately from mileage rates and reviewed quarterly by HMRC.

What is the difference between mileage allowance and fuel reimbursement?

Mileage allowance covers all vehicle-related expenses, while fuel reimbursement accounts solely for fuel costs.

How does HMRC audit mileage claims?

HMRC may request detailed mileage logs and receipts to verify the accuracy of your claims. Non-compliance can result in penalties.

Can self-employed individuals claim mileage expenses?

Yes, self-employed individuals can claim mileage expenses as part of their self-assessment tax return, following HMRC’s approved rates.