The taxman will pay towards your car running costs for business motoring
We explain how tax relief works for business motoring and what to do to claim it.
Tax Relief For Business Motoring
If employees use their own cars on business travel they will normally be eligible for tax relief on the car's running costs.
In practical terms, qualifying mileage reimbursements can be paid tax-free up to HMRC-approved limits. Where an employer pays less, the employee may be entitled to income tax relief on the shortfall.
The amount of relief depends on qualifying business mileage, payments already received and the employee's income tax position.
Also, if an employee gives up a company car and takes a cash allowance instead, the employee will normally stop paying tax on company car benefit and instead pay tax on the cash allowance, but can then offset some of the car's running costs against tax for each business mile travelled.
How Is Tax Relief Given for Business Motoring?
Tax relief is given through fixed pence per mile allowances which include a tax deduction for each business mile travelled during the tax year.
The system is called 'MAPs' (HMRCs' Mileage Allowance Payments).
What is MAPs?
Under 'MAPs' you can pay your employees a tax-free mileage-based allowance for using their car for business motoring.
The allowance is intended to cover the costs of running a car, such as depreciation, maintenance, fuel, insurance and the tax disc.
Alternatively, the employee can claim tax relief for business motoring at the MAPs rates if (s)he doesn't receive a mileage allowance or if the mileage allowance is less than the MAPs rate.
Autumn Budget 2026: Changes To Mileage Allowances
The approved mileage allowance for employees using their own cars or vans increased from 45p to 55p per mile for the first 10,000 business miles, with effect from 6 April 2026. The 2026/27 rate for mileage above 10,000 miles remains 25p per mile.
At the Autumn Budget 2026, the government confirmed that the 55p rate would be permanent and announced an increase in the rate for mileage above 10,000 miles from 25p to 35p, taking effect from 6 April 2027. The latter change is subject to the planned implementing legislation.
| Tax year | First 10,000 business miles | Business miles above 10,000 |
|---|
| Up to 2025/26 | 45p | 25p |
| 2026/27 (6 April 2026 to 5 April 2027) | 55p | 25p |
| From 2027/28 (6 April 2027 onwards) | 55p | 35p (announced) |
These are approved rates for qualifying business mileage in an employee's own car or van, not the Advisory Fuel Rates used for company cars. Employers may reimburse less than these rates; eligible employees can normally claim Mileage Allowance Relief on the shortfall at their applicable income tax rate.
Official sources: Autumn Budget 2026; Budget 2026 tax legislation overview; HMRC mileage rates.
How does MAPs work?
Under the MAPs system, HMRC sets two tax-free mileage allowance rates:
- The full rate can be paid tax-free for the first 10,000 business miles travelled in the tax year.
- The lower rate can be paid tax-free for business mileage over 10,000 miles during the tax year.
You can find details of the current MAPs rates by clicking on this link.
If you pay more than the total allowed under the MAPs scheme then the excess amount is taxed.
Why Two MAPs Rates?
The approved rates recognise that fixed costs such as insurance and Vehicle Excise Duty do not vary directly, no matter how many miles you drive each year.
As the amount of the full rate of MAPs allowance includes a proportion of these fixed costs, once the employee has travelled more than a certain number of business miles each tax year the employee will have been given tax relief in full for the fixed costs.
So, once an employee exceeds the business mileage limit, for any travel over and above the limit (s)he only needs to be given tax relief at a lower rate to cover just the variable costs (depreciation, etc) rather than providing the same allowance for fixed costs again.
In other words, the employee gets tax relief above the business mileage limit only for the costs that continue to increase with each additional mile travelled (such as maintenance and fuel).
Advisory Fuel Rates
HMRC also sets tax-free mileage allowance rates just to cover fuel costs incurred by employees on business motoring.
The mileage rates for cars with internal combustion engines (e.g. petrol and diesel) vary according to the type of fuel for the car and the size of the car's engine.
Advisory Electricity Rates for electric company cars distinguish between home and public charging; check the current HMRC guidance for the applicable rates.
Click on this link to see the current rates.
The advisory rates may be used for tax-free reimbursement of company-car business fuel or electricity costs, typically where:
- An employee has a company car and is being reimbursed for fuel costs on business travel.
- An employer reimburses fuel or electricity costs for business travel in a company car under the applicable advisory rates.
What if You Pay a Cash Allowance?
If you pay a monthly or annual cash allowance, or a mixture of a cash allowance and a mileage based allowance, your employees can still claim tax relief based on the MAPs rates for the business miles travelled.
MAPs Tax Relief Example: 20,000 Business Miles
Assume an employee uses their own car for 20,000 qualifying business miles and receives a taxable annual cash car allowance of £5,000, plus a mileage reimbursement of 10p per business mile (£2,000).
The cash allowance is normally taxable as earnings. The mileage reimbursement is compared with the approved mileage amount to calculate any additional Mileage Allowance Relief (MAR).
| Calculation | 2025/26 | 2026/27 | From 2027/28 |
|---|
| First 10,000 miles | £4,500 | £5,500 | £5,500 |
| Next 10,000 miles | £2,500 | £2,500 | £3,500 |
| Total approved mileage amount | £7,000 | £8,000 | £9,000 |
| Tax-free mileage reimbursement received (10p × 20,000) | £2,000 | £2,000 | £2,000 |
| Potential Mileage Allowance Relief deduction | £5,000 | £6,000 | £7,000 |
The amounts shown as Mileage Allowance Relief are deductions for income tax purposes, not cash payments from HMRC. For example, a £6,000 deduction saves £1,200 in income tax at a 20% marginal rate, assuming sufficient taxable income and full eligibility. The £5,000 cash car allowance remains taxable under the normal rules; it is not simply deducted from the approved mileage amount.
The 2027/28 figures illustrate the announced rate, subject to legislation. See our mileage allowance calculator for interactive examples.
What if You Don't Pay Any Allowances?
You do not have to actually pay a cash allowance or the MAPs allowances for the employee to benefit from them.
For example, if you pay only the employee's salary, or a mileage allowance that is lower than the MAPs rate, the employee can opt to claim tax relief for business use of their own car using MAPs rates.
Let's say the employee travels 20,000 business miles in their own car during the tax year and does not receive a tax-free mileage allowance from you - the employee could then claim Mileage Allowance Relief by reference to 10,000 miles at the full MAPs rate and 10,000 miles at the lower rate, subject to the applicable tax-year rates.
Alternatively, if you paid a tax-free mileage allowance of only 20pence per mile for all business mileage the employee could claim Mileage Allowance Relief on the difference between the approved mileage amount and the qualifying mileage payments received each tax year.
Can Employees Claim Tax Relief In Advance Under PAYE?
Employees do not need to wait until the end of the tax year to claim tax relief under the MAPs system.
They can make an advance claim at the beginning of the tax year for their Pay As You Earn ('PAYE') code number to be adjusted to take account of MAPs.
This can be useful if you pay a monthly allowance with tax deducted (and perhaps also National Insurance Contributions) under the PAYE system.
To make a claim in advance for tax relief under PAYE, the employee simply provides the tax office with an estimate of business mileage for the tax year and asks for the PAYE code number to be adjusted to take account of the MAPs relief for tax year.
The employee's tax code number will then be increased by the estimated tax relief due, which will reduce the tax that the employee pays through the PAYE system, in effect, giving the employee 1/12th of their MAPs tax relief each month.
What About National Insurance Contributions?
Normally the payment of MAPs allowances within the requirements of HMRCs' rules will qualify for exclusion from National Insurance Contributions.
In strictness, for NIC purposes there is no upper threshold on mileage for paying the full rate of MAPs allowance.
This means that you could pay the MAPs rate in full without the 10,000 mile restriction for all business mileage and not have to pay NIC on the amounts received.
In practice though, employers rarely operate a separate approach to tax and NIC as far as MAPs is concerned and typically pay the same amount for both tax and NIC purposes.
Calculators
We've put together two calculators to help you and your employees compare a car's running costs to the allowance rates.
Our MAPs calculator will estimate the running costs for a new car and then compare it to the MAPs allowance rates.
We'll show whether or not the employee could be out of pocket using their own car for business mileage.
Click on this link to get started on MAPs.
Our Electric Car Mileage Rate calculator estimates the cost of recharging an electric car and then compares it to the Advisory Electricity Rate ('AER') produced by HM Revenue & Customs.
With this calculator we show the mileage rate you need for electric cars and whether or not an employee could be out of pocket on recharge costs when using an electric company car.
Click on this link to check the mileage reimbursement rate required for electric company cars.