Last updated: 18 October 2026
How are excess mileage payments taxed?
If you pay an employee more than HMRC’s approved mileage rates for business journeys in their own car, the excess is taxable pay. The approved rates for 2026/27 are 55p a mile for the first 10,000 business miles in a tax year (45p in earlier years) and 25p a mile after that. For National Insurance, the limit is 55p for all business miles. So any payment above the approved amount must go through payroll, with tax and NIC deducted, or be reported on a P11D.
Approved mileage allowance payments (AMAPs)
| Vehicle | First 10,000 business miles | Over 10,000 miles |
| Car or van | 55p | 25p |
| Motorcycle | 24p | 24p |
| Bicycle | 20p | 20p |
Passenger payments of up to 5p a mile per passenger on the same business trip are also tax-free.
Working out the excess
- Multiply the employee’s business miles by the approved rates.
2. Compare this with what you actually paid.
3. The difference is taxable for income tax.
4. For Class 1 NIC, compare what you paid with 55p for every business mile.
Example
Priya drives 14,000 business miles in 2026/27, and her employer pays 60p a mile, which is £8,400.
- Approved amount for tax: 10,000 at 55p (£5,500) plus 4,000 at 25p (£1,000), so £6,500. The excess of £1,900 is taxable.
- Limit for NIC: 14,000 at 55p, which is £7,700. The excess of £700 is subject to Class 1 NIC.
The employer can include the £1,900 in payroll or on a P11D, with Class 1 NIC on the £700 through payroll.
Paying less than the approved rate
If you pay less than 55p and 25p, the employee can claim mileage allowance relief on the shortfall, online or through Self Assessment. For example, an employee paid 30p a mile for 8,000 miles in 2026/27 gets £2,400 against an approved £4,400, so can claim relief on £2,000.
What counts as business mileage
- Travel to a temporary workplace, such as a client’s site
- Journeys between sites during the working day
- Not ordinary commuting between home and the permanent workplace
Company cars are different
If the car is a company car, AMAPs don’t apply. Instead, you can reimburse fuel at HMRC’s advisory fuel rates, which are reviewed each quarter. Paying above these rates can create a taxable benefit, or a fuel benefit charge if private fuel is provided.
Electric cars
For an employee’s own electric car, the same 55p and 25p rates apply. For company electric cars, the advisory electricity rate applies.
Records
Keep a mileage log with dates, start and end points, purpose and miles for each journey. Without records, HMRC can treat payments as taxable.
Car allowances
A fixed monthly car allowance is taxable pay in full, through payroll. Many employers pay a car allowance plus a lower mileage rate. In that case, the employee can claim mileage allowance relief on any shortfall below 55p and 25p.
Frequently asked questions
Do I need to report AMAPs?
Not if you pay within the approved rates.
Can directors use AMAPs?
Yes, in their own cars.
Can I pay more to cover high fuel prices?
Yes, but the excess is taxable.
Is VAT reclaimable?
Only on the fuel element, with receipts.
Related: VAT on mileage allowances, car fuel and mileage and employment expense claims.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with mileage allowances. See our small business accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 18 October 2026. It is not personal advice, so speak to an accountant about your own situation.
