Managing employee travel expenses through mileage reimbursement requires precision — because small errors can add up fast. The process only gets more complex as teams grow, leading to confusing calculations and stacks of receipts.
This is why a mileage reimbursement policy is crucial: It standardises the process so finance leaders keep compliance in check without investing too much time reviewing the data.
The U.K.’s tax, payments, and customs authority, His Majesty’s Revenue and Customs (HMRC), has clear rules for tracking and reimbursement of mileage claims. Adhering to HMRC’s requirements helps organisations avoid compliance issues and handle travel spend more effectively.
Here are the current HMRC guidelines, how mileage reimbursement works, and a practical framework for creating a mileage reimbursement policy. We also cover how mileage reimbursement automation transforms expense management and why Moss is the tool you need.
What is mileage reimbursement?
Mileage reimbursement is compensation for employees who use their personal vehicles for business travel. It covers the cost of fuel, maintenance, tax, and depreciation, as per HMRC’s standard mileage rates. Rate standardisation keeps expense reporting compliant and easy to manage.
Two HMRC concepts guide mileage reimbursement in the U.K.:
- Advisory fuel rates (AFRs) apply to company cars and provide guidance on mileage rates for these vehicles.
- Authorised mileage allowance payments (AMAPs) apply to employees using personal vehicles for business travel.
Business travel includes client site visits, vendor meetings, and trade conferences, but regular commutes between home and the office aren’t considered business travel. Defining what counts as ‘business travel’ in employee mileage reimbursement rules prevents misunderstandings during claims submission and helps finance teams apply the right reimbursement rate.
HMRC mileage rates in the U.K.
Mileage reimbursement depends on annual AMAP rates set by HMRC, which reflect typical vehicle running costs. HMRC’s approved rates are the tax-free threshold. Payments at or below these rates aren’t taxable for employees.
For the 2025 tax year, the standard AMAP rates by vehicle type are:
- Cars and vans: 45p per mile for the first 10,000 business miles in the tax year; 25p per mile thereafter
- Motorcycles: 24p per mile
- Bicycles: 20p per mile
When colleagues share a car on business trips, the driver can receive 5p extra per passenger per mile.
While HMRC has approved these rates, employers don’t have to follow them. Companies can set their reimbursement rate as equal, higher, or lower, depending on their financial policy. This wiggle room is intentional to let companies use higher mileage rates as a perk to attract and retain staff.
If a company reimburses miles below the approved rates, employees can claim the difference using Mileage Allowance Relief. If a company pays more, it must report the excess amount as taxable income through payroll.
How does mileage reimbursement work?
An effective mileage reimbursement process starts with proper documentation of travel, followed by claims review and payment. Though each organisation may structure this process differently, the sections below outline some common factors affecting reimbursement.
Eligible travel expenses and claims submission
Employees can claim mileage for trips that are strictly for business purposes, such as visits to client offices or supplier headquarters. They must record each journey with the date, destination, purpose, and mileage covered.
As soon as payments process, employees should submit claims for timely review. Submitting through a standard company form or online portal avoids approval delays.
Finance teams should clearly define submission timelines and required paperwork, like mileage logs, toll or parking receipts, and confirmation of business purpose. For example, employees might need to submit claims within 30 days of travel to be eligible for reimbursement to encourage regular reconciliation.
Mileage rates and taxation
HMRC rates are a straightforward way to calculate tax-free mileage reimbursements, and reimbursing at the approved rate simplifies compliance. If company-specific policies mandate different rates, finance teams must manage the tax implications and report taxable elements through payroll.
Clarity on whether mileage reimbursement is taxable also protects both the company and its employees during audits. It ensures companies remain tax compliant and meet HMRC regulations.
Automating mileage reimbursements
Manual mileage tracking and claim submissions are time-consuming, prone to errors, and difficult to audit. A platform that automates this process—by integrating mileage tracking, approvals, and reimbursements in one place—streamlines operations, reduces administrative effort, and ensures accurate, timely payments for every trip.
Finance teams can use Moss to offer employees both standard HMRC rates and custom mileage rates, depending on company policy. The mileage feature enables map-based journey tracking and the ability to set reimbursement limits, such as maximum miles per day or per claim, based on regulatory frameworks. Moss has introduced several improvements to its mileage functionality, making the reimbursement process more accurate and efficient for finance teams and employees alike.
Employee rules and compliance
Compliance depends on employees providing accurate information with all the required documentation.
Internal guidance should explain how to separate business and personal travel, record travel, and submit claims on time. The company’s expense policy should describe the broader guidelines on employee responsibilities.
Common mistakes to avoid
Finance should regularly review claims data to identify recurring issues and address them through updated guidance or training. Frequent mistakes include applying the wrong mileage rate, omitting receipts, submitting claims for nonqualifying travel, and failing to record required details. Automation reduces these problems by standardising inputs and flagging incomplete submissions.
Creating a compliant mileage reimbursement policy
A mileage reimbursement policy helps employees understand what’s expected and equips finance teams with a framework to manage claims. It should outline which journeys qualify, the required documentation, how the company calculates and approves reimbursements, and more.
Manual vs. automated processes: the challenges and solutions
Manual mileage reimbursement processes rely on spreadsheets, handwritten logs, and email approvals. These methods increase the risk of lost receipts and delayed payments. They also make it harder to maintain audit trails due to inconsistent formatting and unorganised records.
A modern expense management platform centralises submissions and automates processes to integrate approvals directly into payment workflows. Moss supports both custom mileage rates and standard governmental rates. Plus, it uses built-in map distance calculations to maintain accurate records, reducing administrative burden and supporting tax compliance. By replacing manual tasks with automation, finance teams gain more visibility and control over reimbursement processes, as well as comprehensive records.
A faster, more structured way to manage mileage reimbursement
HMRC scrutiny and the need for efficient finance operations are driving the digitisation of mileage reimbursement. Accounting departments that still rely on manual methods face growing compliance risks and administrative pressure.
Moss’ reimbursements platform gives finance teams the tools to process claims efficiently while maintaining oversight of business travel expenses. Applying the right mileage claim rate eliminates business costs from overpayment and tax liabilities while giving employees fair reimbursements. It’s a win-win for everyone involved.
FAQs
The standard rates for cars and vans are 45p per mile for the first 10,000 miles, and 25p thereafter. Motorcycles are reimbursed at 24p per mile, and bicycles at 20p per mile.
By applying HMRC rates accurately, setting internal rules for reimbursement, maintaining records, and using automated tools to reduce errors and standardise submissions.
Companies can reimburse for mileage alongside parking fees, tolls, or other business travel costs, provided these expenses are supported by documentation.
Automating journey recording, rate calculation, and approvals within a single platform allows finance teams to reduce administrative work and improve accuracy.