If your business is VAT-registered and you reimburse employees for using their own cars on business journeys, you are almost certainly leaving money on the table. The fuel element of every mileage payment contains reclaimable VAT, and the process for recovering it is surprisingly straightforward once you understand the formula.
This guide walks through exactly how to claim VAT on mileage in the UK for 2026 — who qualifies, the calculation, the advisory fuel rates you need, and the records HMRC expects you to keep.
Who Can Reclaim VAT on Business Mileage?
Not every business can reclaim VAT on mileage payments. You must meet two conditions:
- Your business is VAT-registered — whether voluntarily or because turnover exceeds the registration threshold.
- You are reimbursing employees, directors, or partners for business miles driven in their own personal vehicles.
The critical distinction is that only the fuel portion of the mileage payment carries VAT. When your business pays the approved 45p per mile, that rate bundles together fuel, depreciation, insurance, maintenance, and general wear and tear. HMRC only allows you to reclaim the VAT charged on fuel — nothing else.
If you are a sole trader who is not VAT-registered, there is no input VAT to reclaim. And if your business provides company cars with fuel cards, the VAT position is different — you reclaim VAT directly from the fuel card invoices rather than through the mileage formula. For more on the 45p rate itself, see our guide to 45p per mile HMRC explained.
The Formula: Business Miles x AFR / 6
The VAT reclaim calculation uses HMRC’s Advisory Fuel Rates (AFRs) to isolate the fuel cost from the total mileage payment. Here is the formula:
VAT reclaimable = business miles x advisory fuel rate / 6
The division by 6 is not arbitrary. Because VAT is charged at 20%, the VAT-inclusive price of fuel already contains VAT at a fraction of 20/120, which simplifies to 1/6. So dividing the total fuel cost by 6 extracts the VAT element.
Step by step:
- Identify the correct AFR for the employee’s vehicle (based on fuel type and engine size).
- Multiply the AFR by the number of business miles driven in the period.
- Divide the result by 6 to arrive at the reclaimable VAT.
That final figure goes on your VAT return as input tax.
Advisory Fuel Rates for Q1 2026 (From 1 March)
HMRC updates advisory fuel rates quarterly — in March, June, September, and December. Using the correct rate for the period of travel is essential. The rates effective from 1 March 2026 are:
Petrol
| Engine size | Rate per mile |
|---|---|
| Up to 1,400cc | 12p |
| 1,401 - 2,000cc | 14p |
| Over 2,000cc | 22p |
Diesel
| Engine size | Rate per mile |
|---|---|
| Up to 1,600cc | 12p |
| 1,601 - 2,000cc | 13p |
| Over 2,000cc | 18p |
LPG
| Engine size | Rate per mile |
|---|---|
| Up to 1,400cc | 10p |
| 1,401 - 2,000cc | 12p |
| Over 2,000cc | 19p |
Electric vehicles
| Charging type | Rate per mile |
|---|---|
| Home charging | 7p |
| Public charging | 15p |
Employers can continue using the previous quarter’s rates for up to one month after new rates take effect. For full details on the AFR schedule and how the rates are set, see our article on HMRC advisory fuel rates for 2026.
Worked Example: Petrol Car and Electric Car
Example 1 — Petrol car, 1,600cc engine
Your sales manager drives 2,400 business miles in the quarter using a personal petrol car with a 1,600cc engine. The AFR for a 1,401-2,000cc petrol car from 1 March 2026 is 14p per mile.
- Fuel cost: 2,400 miles x 14p = £336.00 (VAT-inclusive)
- VAT reclaimable: £336.00 / 6 = £56.00
You claim £56.00 as input tax on your VAT return for that quarter. The employee still receives the full 45p per mile (or whatever your business pays) — the VAT reclaim is a separate matter handled by the business.
Example 2 — Electric car, home charging
A field engineer drives 1,800 business miles and charges at home. The advisory electricity rate for home charging is 7p per mile.
- Electricity cost: 1,800 miles x 7p = £126.00
- However, domestic electricity is subject to VAT at 5%, not 20%. The VAT fraction for a 5% rate is 5/105, which is 1/21.
- VAT reclaimable: £126.00 / 21 = £6.00
The lower VAT rate on domestic electricity means the reclaim is smaller per mile, but it remains a legitimate saving. If the employee charges at public charging points (where VAT is 20%), you use the 15p public charging rate and divide by 6 as normal.
Fuel Receipts: The Record HMRC Requires
You cannot claim VAT on mileage without fuel receipts. This catches many businesses off guard — after all, you are not reclaiming VAT from a specific receipt. But HMRC’s rules are clear: fuel VAT receipts must be retained to support the reclaim.
What HMRC expects:
- The employee must provide fuel receipts showing VAT was charged on fuel purchases.
- The total value of receipts must cover at least the fuel cost calculated via the AFR formula.
- If receipts fall short of the calculated fuel cost, the VAT reclaim is limited to the amount supported by receipts.
Practical example: If the AFR-based fuel cost is £336 (as in the petrol example above), the employee needs fuel receipts totalling at least £336. The receipts do not need to correspond to specific journeys — they simply need to evidence that the employee purchased enough fuel and paid VAT on it.
Encourage employees to keep every fuel receipt. A mileage tracking app like Tripbook makes it straightforward to log business journeys in real time, so the mileage data is always ready when you need to calculate the VAT reclaim at quarter-end.
Common Mistakes That Reduce or Invalidate Your Claim
Even experienced finance teams make errors with mileage VAT. Here are the pitfalls to watch for:
Reclaiming VAT on the full 45p rate. Only the fuel element (the AFR) carries reclaimable VAT. The remaining portion of the 45p covers depreciation, insurance, and maintenance — none of which attract VAT. Claiming on the full rate overstates your reclaim and risks an HMRC assessment.
Using 20% instead of dividing by 6. The fuel cost already includes VAT, so you extract the VAT fraction (1/6), not add 20% on top. Multiplying by 20% overstates the reclaim by a sixth.
Applying the wrong AFR. Rates change quarterly. If an employee drove business miles in February 2026, you must use the December 2025 rates, not the March 2026 rates. Always match the AFR to the period of travel.
Missing or insufficient fuel receipts. Without VAT fuel receipts covering the value of the claim, the reclaim is reduced or disallowed entirely. This is the single most common reason HMRC queries mileage VAT claims.
Forgetting electric vehicle VAT differences. Home charging uses a 5% VAT rate (divide by 21), while public charging uses the standard 20% rate (divide by 6). Mixing these up either understates or overstates the reclaim.
For guidance on keeping mileage logs that satisfy HMRC, see our article on business mileage record-keeping for HMRC.
Make It Easier with Accurate Mileage Records
Reclaiming VAT on mileage is a genuine, often overlooked saving for VAT-registered businesses. The formula is simple — business miles multiplied by the advisory fuel rate, divided by 6 — and the quarterly saving adds up across a team of employees.
The hardest part is not the maths. It is making sure your mileage records are accurate and your fuel receipts are in order. Tripbook helps by giving employees a simple way to log every business journey from their phone, with GPS-verified distances and automatic HMRC-compliant reports. That means fewer gaps in your records and a defensible VAT reclaim every quarter.
Download Tripbook for iPhone and start building the mileage records your business needs.
