An employee uses their own car to visit a customer in Newcastle, calls at a second site in County Durham and submits the mileage at month end. Payroll asks whether the business must pay 55p per mile, the manager cannot confirm which part of the journey qualifies and the employee has no agreed evidence standard. That is not just an admin problem. Business mileage reimbursement sits across contracts, tax, payroll, minimum wage and driving-for-work controls. A short written process prevents inconsistent payments and rejected claims.
Start with the agreement—not the HMRC rate
There is no single rule requiring every UK employer to reimburse every business journey at HMRC's approved rate. The obligation to pay expenses may arise from the employment contract, an expenses policy, a collective agreement or an established custom and practice. Acas says employers would usually repay work-related expenses and should use a policy where payments are expected.
The policy should answer the practical questions before anyone travels: which journeys are authorised, whether public transport should be used, what mileage rate applies, who approves the trip, the claim deadline and what evidence is needed. If a regular payment arrangement is changed or withdrawn, check whether it has become contractual rather than treating the policy as automatically discretionary.
Use the correct 2026 approved mileage rates
For the 2026 to 2027 tax year, the approved rate for an employee using their own car or van is 55p for each of the first 10,000 business miles and 25p for each business mile above 10,000. The first rate increased from 45p on 6 April 2026. The approved rates are 24p for motorcycles and 20p for cycles. They apply to qualifying business miles, not the vehicle's fuel type, so the car and van rate also covers electric and hybrid vehicles.
These figures set the amount that can normally be paid as an approved mileage allowance without tax reporting; they do not force an employer to adopt that exact rate. If total mileage payments exceed the approved amount, the excess must be handled for tax through payroll or reported as HMRC requires. If the employer pays less, the employee may be able to claim Mileage Allowance Relief on the shortfall. That is tax relief on the difference—not a payment of the difference by HMRC.
GOV.UK: mileage rates and allowances ↗ · GOV.UK: mileage payments and tax ↗
Define a business journey before approving the claim
A journey is not business travel merely because it happened on a working day. Ordinary travel between home and a permanent workplace is generally commuting, not business mileage for the approved allowance. Travel to visit a customer, move between workplaces or attend a qualifying temporary workplace may be business travel, but the tax rules around temporary workplaces and expected attendance can be technical.
Do not let employees or line managers invent the rule claim by claim. State the normal starting point for mileage, how home-to-site journeys are compared with an ordinary commute, and when payroll or an adviser must review an unusual pattern. A worker based from home, a mobile engineer and an office employee attending one external meeting may each need a different answer based on the real employment arrangements.
Do not ignore the minimum-wage calculation
Tax-free does not mean cost-free, and a mileage policy must not be reviewed only through HMRC's tax rules. Where a worker pays an expense incurred in connection with their employment and the employer does not repay it, that cost can reduce pay for National Minimum Wage purposes. This matters most for lower-paid staff who are required to use their own vehicle, buy equipment or meet other necessary work costs.
Test the position in each pay reference period. Reimbursement itself does not count as minimum-wage pay: it restores money the worker spent for the job. If the unreimbursed work expense leaves adjusted pay below the applicable minimum, the employer may owe arrears even where the headline hourly rate appears compliant. Ordinary home-to-work commuting is treated differently, so record why the journey was necessary for the work.
GOV.UK: calculating the minimum wage ↗ · HMRC manual: employment expenses and minimum wage ↗
Separate mileage from journey-specific costs
The approved mileage rate is intended to cover the general costs of using the employee's own vehicle, including fuel, servicing, tyres, insurance and depreciation. Do not add a separate fuel reimbursement for the same private-car miles without checking the tax treatment. Parking, tolls and accommodation are different: they are costs of the particular journey and should be dealt with under their own evidence and approval rules.
HMRC also permits an additional 5p per passenger per business mile where an employee carries a fellow employee on a journey that is also business travel for that passenger. This passenger payment is optional. If the employer pays less than 5p or nothing, the driver cannot claim tax relief for the unpaid passenger amount. Make the policy clear so informal lift-sharing does not become an inconsistent payroll practice.
Make the policy usable for managers and payroll.
HR + SAFETY can help North East SMEs define eligible travel, evidence, approval and minimum-wage checks in one practical expenses process.
Discuss an expenses policy reviewRequire evidence that payroll can check
A useful mileage claim records the date, start and destination, business purpose, miles travelled, vehicle type, passengers where relevant and approving manager. HMRC requires employers to keep records of payments and the business journeys to which they relate, even where payments remain within the approved amount. A total mileage figure without the journeys behind it is weak evidence.
Set a monthly deadline and require the manager to check business purpose rather than simply approving the arithmetic. Use a consistent mileage calculation method and preserve the approved claim with payroll records. If an employee has lost a receipt for a separate expense, Acas suggests considering alternative evidence such as a bank statement or booking reference rather than applying an unexplained exception.
Business mileage reimbursement checklist
Law, tax rates and official guidance were checked on 6 November 2026. The 55p rate has applied since 6 April 2026 and is an approved tax amount, not a universal contractual reimbursement requirement. Obtain payroll or tax advice where travel patterns, temporary workplaces, salary sacrifice or payments above the approved amount make the position uncertain.
- Confirm whether the right to expenses comes from a contract, policy, agreement or established practice.
- State which journeys qualify and how ordinary commuting is excluded.
- Publish the mileage rate and the date on which it applies.
- Use 55p for the first 10,000 car or van business miles only if that is the employer's chosen rate.
- Explain the separate treatment of parking, tolls, accommodation and passenger payments.
- Require the journey date, route, purpose, miles, vehicle and manager approval.
- Check whether unreimbursed necessary costs reduce pay below the minimum wage.
- Verify business-use insurance, licence and vehicle controls separately from the expense claim.
- Tell payroll how excess payments, shortfalls and tax relief are handled.
- Review the policy when HMRC rates, roles or travel patterns change.
Treat business mileage as a controlled employment process, not a number copied from an HMRC table. Agree the entitlement, define the journey, record the evidence, check minimum wage and keep driving-for-work controls separate from payroll approval.
This guide provides general information for UK employers. It is not legal advice and should not replace advice based on the facts of a specific matter.