Millions of UK employees use their own car for work journeys every week. Yet a huge number of employers reimburse mileage at rates well below the HMRC approved amount, leaving staff out of pocket without realising they can do anything about it. If your employer pays less than 45p per mile, you are almost certainly entitled to claim tax relief on the difference. This guide explains exactly how.
Why So Many Employers Pay Below the HMRC Rate
HMRC sets a tax-free mileage rate of 45p 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, or 30p per mile. Some pay nothing at all.
There are several reasons this happens:
- Outdated company policies that were set years ago and never reviewed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 45p = £3,600
- Employer pays: 8,000 x 20p = £1,600
- MAR shortfall: £3,600 - £1,600 = £2,000
- Tax relief at basic rate (20%): £400 back
- Tax relief at higher rate (40%): £800 back
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 45p = £4,500
- Next 2,000 miles at HMRC rate: 2,000 x 25p = £500
- HMRC total: £5,000
- Employer pays: 12,000 x 25p = £3,000
- MAR shortfall: £5,000 - £3,000 = £2,000
- Tax relief at basic rate (20%): £400 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 45p = £2,700, giving a basic-rate tax saving of £540.
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.
How Much Could You Get Back?
The table below shows the annual tax saving for common employer rates, assuming 8,000 business miles per year:
| Employer rate | Shortfall per mile | MAR claim | Basic-rate saving (20%) | Higher-rate saving (40%) |
|---|---|---|---|---|
| 0p (nothing) | 45p | £3,600 | £720 | £1,440 |
| 15p | 30p | £2,400 | £480 | £960 |
| 20p | 25p | £2,000 | £400 | £800 |
| 25p | 20p | £1,600 | £320 | £640 |
| 30p | 15p | £1,200 | £240 | £480 |
Multiply those figures by up to five years of backdated claims and the total mounts up quickly. A basic-rate taxpayer whose employer pays 20p per mile and who drives 8,000 miles annually could recover £2,000 in total by claiming five years at once.
For the current HMRC rates and thresholds, see our HMRC mileage rate 2026 guide.
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 45p 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 45p per mile, 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.
