Motoring expenses - how to exceed HMRC’s tax-free limit
Motoring expenses - how to exceed HMRC’s tax-free limit
Our subscriber owns and manages a company and is also an employee of another firm. He uses his car for both jobs. Normally, that entitles him to tax relief at HMRC’s maximum mileage rate for 10,000 miles. Is there a way he can increase this limit?
Mileage allowances and payments
Our subscriber is aware that when employees or company directors travel on business they are entitled to tax relief for the costs they incur. Also, that where journeys are made in a personally owned car the tax relief is worked out using HMRC’s mileage rates: 45p per mile for up to 10,000 miles and 25p per mile thereafter. So far so good, but things can get surprisingly tricky from here.
MAPs and MARs
There are two ways in which you can obtain tax relief for business mileage when you use your car:
A tax and NI-free amount up to the HMRC approved rate paid to the employee. This is referred to as a mileage allowance payment (MAP); or
Where the business pays less than the HMRC approved rate, by claiming the difference as a tax-deductible expense. This is called mileage allowance relief (MAR).
Example. Janine is an employee of Acom. In June 2025 she travels 300 miles visiting Acom’s clients. It pays Janine 35p per mile, i.e. £105. This is £30 (300 x (45p – 35p)) less than the HMRC approved rate. Janine is entitled to claim £30 MAR from HMRC via her tax return or HMRC expenses claim form P87.
Multiple limits
However, the calculation of MAPs and MARs is modified if, like our subscriber, an employee has multiple employments.
Tip. Each employment has its own 45p mileage limit. This means an employee working for two different employers could be paid a tax and NI-free MAP for up to 20,000 miles (10,000 per employment).
Trap. The multiple MAP limits do not apply if the employments are associated. Broadly, associated means that the one employer controls the other.
Example. Our subscriber controls the company he owns and is a director of but his other employment is owned and run by individuals with whom he has no business or personal connection other than in his role as an employee. He is therefore entitled to MAPs and MARs at the 45p rate for 10,000 miles per employment.
How much MAR?
In 2024/25 our subscriber travelled 6,000 miles on business for his company and 7,500 miles for the other business. The latter paid him 35p for each mile, whereas his own company paid him nothing. He asked us how much MAR he was entitled to claim. There’s a simple formula for working out how much MAR you can claim from HMRC: it’s the total of MAPs paid less the HMRC approved amount for the mileage. Only if the result is negative can an MRR be claimed.
Applying the formula to our subscriber’s circumstances we get total MAPs received £2,625 (7,500 x 35p) less £6,075 ((7,500 + 6,000) x 45p). The result is negative £3,450. This is the amount of MAR our subscriber can claim even though it means he’s received relief at 45p per mile for more than the standard 10,000 miles.
Our subscriber is entitled to tax relief at the higher HMRC rate (45p per mile) for more than the normal maximum of 10,000 miles. This is because in most circumstances the 10,000 mile limit applies for each employment. He can claim the difference between the allowance he was paid and the amount payable had the HMRC rate been used.