Millions of UK employees use their own car for work journeys every week. Yet a huge number of employers reimburse mileage at rates below the HMRC approved amount, leaving staff out of pocket without realising they can do anything about it. If your employer pays less than 55p per mile, you are almost certainly entitled to claim tax relief on the difference. This guide explains exactly how.
The number of employees in that position jumped sharply in 2026. HMRC raised the approved rate from 45p to 55p per mile on 6 April 2026 — announced on 21 May and backdated to the start of the tax year — so every employer still running a 45p policy has, overnight, become an employer paying below the approved rate.
The New 10p Gap: Employers Still Paying 45p
For fourteen years, 45p per mile was the HMRC approved rate, and an employer paying 45p was paying exactly the right amount. Since 6 April 2026 that is no longer true. The approved rate is 55p, and 45p leaves a 10p per mile shortfall that the employee can claim as Mileage Allowance Relief.
This is the single most common shortfall in the UK right now, precisely because 45p was the correct figure for so long. Company mileage policies, expense systems and staff handbooks written before May 2026 all say 45p, and most have not yet been updated.
Worked Example: Employer Pays 45p Per Mile
Priya is a regional account manager who drives 9,000 business miles in 2026/27. Her employer’s expenses policy, last reviewed in 2023, reimburses at 45p per mile.
- HMRC approved amount: 9,000 x 55p = £4,950
- Employer pays: 9,000 x 45p = £4,050
- MAR shortfall: £4,950 − £4,050 = £900
- Tax relief at basic rate (20%): £180 back
- Tax relief at higher rate (40%): £360 back
Priya’s employer has done nothing wrong — paying at or below the approved rate is always permitted, and 45p was correct until April 2026. But the 10p gap is hers to claim, and it did not exist before 6 April 2026.
The same arithmetic scales with your mileage. At 55p versus 45p, every 1,000 business miles is worth £100 of MAR, which is £20 back at the basic rate and £40 at the higher rate.
| Annual business miles | Shortfall at 45p employer rate | Basic-rate refund (20%) | Higher-rate refund (40%) |
|---|---|---|---|
| 3,000 | £300 | £60 | £120 |
| 6,000 | £600 | £120 | £240 |
| 9,000 | £900 | £180 | £360 |
| 10,000 | £1,000 | £200 | £400 |
Above 10,000 miles the approved rate drops to 25p, which did not change in 2026. So if your employer pays 45p on every mile, they are actually paying above the approved rate on miles beyond 10,000 — and no MAR is available on those. The 10p gap applies only to the first 10,000 business miles.
Why So Many Employers Pay Below the HMRC Rate
HMRC sets a tax-free mileage rate of 55p per mile for the first 10,000 business miles per tax year (and 25p per mile after that). Employers are free to pay this rate, but they are not legally required to. In practice, many organisations set their own lower rates, often 20p, 25p, 30p or the now-outdated 45p per mile. Some pay nothing at all.
There are several reasons this happens:
- Policies not yet updated for the May 2026 increase — by far the most common cause today, leaving staff on 45p
- Outdated company policies that were set years ago and never reviewed
- Budget constraints in the public sector and NHS, where trusts sometimes reimburse at 25p per mile or less
- Misunderstanding of the rules — some employers assume any reimbursement is sufficient
- No mileage policy at all — staff receive nothing and wrongly assume there is no recourse
Whatever the reason, the shortfall between what your employer pays and the HMRC approved rate is yours to claim as tax relief. This is called Mileage Allowance Relief (MAR), and it applies regardless of your employer’s internal policy.
How Mileage Allowance Relief Works
MAR reduces your taxable income by the uncovered portion of the HMRC rate. The formula is simple:
MAR shortfall = (HMRC rate - Employer rate) x Business miles
You do not receive the full shortfall as cash. Instead, you receive tax relief on that amount, meaning your income tax bill is reduced by the shortfall multiplied by your marginal tax rate.
Worked Example: Employer Pays 20p Per Mile
Sarah is a community care worker who drives 8,000 business miles per year. Her employer reimburses her at 20p per mile.
- HMRC approved amount: 8,000 x 55p = £4,400
- Employer pays: 8,000 x 20p = £1,600
- MAR shortfall: £4,400 - £1,600 = £2,800
- Tax relief at basic rate (20%): £560 back
- Tax relief at higher rate (40%): £1,120 back
Sarah’s £2,800 shortfall is above the £2,500 P87 limit, so she would need to claim through Self Assessment rather than a P87 — a line that more employees now cross because of the higher approved rate.
Worked Example: Employer Pays 25p Per Mile
James is a sales rep who covers 12,000 miles per year. His company pays 25p per mile.
- First 10,000 miles at HMRC rate: 10,000 x 55p = £5,500
- Next 2,000 miles at HMRC rate: 2,000 x 25p = £500
- HMRC total: £6,000
- Employer pays: 12,000 x 25p = £3,000
- MAR shortfall: £6,000 - £3,000 = £3,000
- Tax relief at basic rate (20%): £600 back
- Tax relief at higher rate (40%): £1,200 back
Note that once you exceed 10,000 business miles, the HMRC rate drops to 25p. If your employer already pays 25p, there is no additional shortfall on those extra miles.
What If Your Employer Pays Nothing?
If you receive no mileage reimbursement at all, you can claim the full HMRC rate as MAR. For someone driving 6,000 unreimbursed business miles, the shortfall would be 6,000 x 55p = £3,300, giving a basic-rate tax saving of £660.
How to Claim: P87 Form or Self Assessment
There are two routes to claiming MAR, depending on whether you already file a Self Assessment tax return.
Route 1: P87 Form (Most Employees)
If your only reason for contacting HMRC is to claim employment expenses, and your total claim is £2,500 or less, you use the P87 form (Tax relief for expenses of employment). You can submit it:
- Online through your HMRC personal tax account at gov.uk
- By post to HMRC
On the form, you provide your employer’s PAYE reference, the tax year, total business miles in your own vehicle, and the amount your employer reimbursed. HMRC then adjusts your tax code or sends a repayment.
For a detailed walkthrough of the P87 process, see our guide on how to submit a P87 form online.
Route 2: Self Assessment
If you already file a Self Assessment return (for example, because you have rental income or other untaxed earnings), you claim MAR through the employment expenses section of your return. Enter your total business miles and total employer mileage payments, and the relief is calculated automatically.
Our guide to claiming mileage through Self Assessment covers this in detail.
Important: You Can Backdate Up to 4 Years
You can claim MAR for the current tax year and the four previous tax years. In the 2026/27 tax year, that means you can still claim back to 2022/23. If you have been driving for work for several years without claiming, the accumulated relief could run into the thousands.
One important detail when backdating: use the rate that applied in each year. The approved rate was 45p from 2011 until 5 April 2026, and 55p only from 6 April 2026. So a claim covering 2022/23 to 2026/27 uses 45p for the four earlier years and 55p for the current one.
How Much Could You Get Back?
The table below shows the annual tax saving for common employer rates in 2026/27, assuming 8,000 business miles per year against the 55p approved rate:
| Employer rate | Shortfall per mile | MAR claim | Basic-rate saving (20%) | Higher-rate saving (40%) |
|---|---|---|---|---|
| 0p (nothing) | 55p | £4,400 | £880 | £1,760 |
| 15p | 40p | £3,200 | £640 | £1,280 |
| 20p | 35p | £2,800 | £560 | £1,120 |
| 25p | 30p | £2,400 | £480 | £960 |
| 30p | 25p | £2,000 | £400 | £800 |
| 45p (the old approved rate) | 10p | £800 | £160 | £320 |
Every row in this table improved on 6 April 2026. An employee on 20p per mile, for instance, previously had a £2,000 claim at 8,000 miles; the same driving now produces £2,800.
Multiply those figures by up to five years of backdated claims and the total mounts up quickly — remembering that earlier years use the 45p rate. A basic-rate taxpayer whose employer pays 20p per mile and who drives 8,000 miles annually would recover £560 for 2026/27 (at 55p) plus £400 for each of the four earlier years (at 45p): £2,160 in total.
For the current HMRC rates and thresholds, see our HMRC mileage rate 2026 guide, or check the official figures in Travel — mileage and fuel rates and allowances on GOV.UK.
What Records Does HMRC Require?
HMRC expects you to keep a mileage log that records:
- Date of each business journey
- Start and end locations (or at minimum, the destination)
- Purpose of the trip
- Miles driven
You do not need to keep fuel receipts for an AMAP-based claim. The 55p rate is a flat allowance designed to cover fuel, wear, insurance, and all running costs. However, without a proper mileage log, HMRC can reject your claim entirely during an enquiry.
Building this log manually is tedious, which is why many employees use a GPS tracking app. Tripbook records every journey automatically using your phone’s GPS and lets you categorise each trip as business or personal with a single swipe. When you are ready to claim, export your annual totals and submit your P87 or Self Assessment return with confidence.
Start Claiming What You Are Owed
If your employer pays less than 55p per mile — including the many still on the old 45p rate — you are leaving money on the table every single month. Mileage Allowance Relief exists specifically to cover the gap, and claiming it is straightforward once you have accurate records.
The first step is to start logging your business miles properly. Tripbook makes this effortless with automatic GPS tracking designed for UK employees and HMRC-ready exports.
Download Tripbook from the App Store and start building the mileage log you need to claim back every penny you are owed.
