If you run a limited company and use your own car for business journeys, the 45p-per-mile mileage claim is one of the most tax-efficient ways to get money out of your company. The company pays you, claims a corporation tax deduction, and you receive the payment completely free of income tax and National Insurance. No P11D reporting, no payroll complications — just a clean business expense.
This guide walks through exactly how the limited company mileage claim at 45p works in 2026/27, including the two routes for processing it, the tax treatment on both sides, what records HMRC expects, and when a company car might be the better option.
How the 45p Mileage Claim Works Through a Limited Company
The mechanics are straightforward. When you drive your personal car for a business journey, your limited company reimburses you at HMRC’s Approved Mileage Allowance Payment (AMAP) rate. For cars and vans, that rate is 45p per mile for the first 10,000 business miles in the tax year, dropping to 25p per mile for anything beyond that threshold.
Two things happen simultaneously:
- You receive the payment tax-free — no income tax, no employee National Insurance contributions
- The company deducts the full amount from its taxable profits, saving 25% corporation tax on every pound paid
The 45p rate is designed to cover all running costs of the vehicle: fuel, insurance, road tax, servicing, depreciation, and wear and tear. Because HMRC considers those costs baked into the rate, you cannot claim any of them separately on top of the mileage payment.
The 10,000-mile threshold applies per tax year (6 April to 5 April), not per company financial year. If you hold directorships in multiple companies, your combined business mileage across all of them counts towards the single 10,000-mile limit.
Payroll Route vs Director’s Loan Account Route
There are two ways your company can process the mileage reimbursement, and both are legitimate.
Through Payroll as an Expense Reimbursement
The company processes the mileage payment alongside your regular payroll run. The payment appears on your payslip but is not subject to PAYE or NIC, provided it stays within the approved rates. Your payroll software should handle this correctly if the mileage is coded as an AMAP — it will not attract tax or NIC.
This route creates a clean audit trail and is the approach HMRC would consider best practice for companies with employees beyond just the director.
Through the Director’s Loan Account (DLA)
Many single-director companies use the DLA route instead. The mileage owed to you is recorded as a credit on your director’s loan account — the company owes you the money. You can then withdraw that amount from the company bank account whenever it suits you, or offset it against any existing debit balance on your DLA.
This approach is common because it is simpler for small companies. Your accountant would typically process a journal entry categorising the mileage expense against the DLA at year end or periodically throughout the year. The corporation tax deduction works identically regardless of which route you choose.
Key point: whichever route you use, the company must actually record the expense properly in its accounts. An informal arrangement where you just withdraw cash without documentation will not stand up to an HMRC enquiry.
Tax and NIC Treatment: Both Sides of the Equation
The tax efficiency of the 45p mileage claim becomes clear when you compare it to taking the same amount as salary or dividends.
For the director (you):
- Mileage at the approved rate: 0% income tax, 0% NIC
- The same amount as salary: up to 40% income tax + 8% employee NIC
- The same amount as dividends: up to 33.75% tax (above the dividend allowance)
For the company:
- Mileage reimbursement: fully deductible, no employer NIC
- Salary payment: fully deductible, but 13.8% employer NIC on top
- Dividend payment: not deductible at all — paid from post-tax profits
Example: You drive 8,000 business miles in the 2026/27 tax year.
| Mileage claim | Equivalent salary | |
|---|---|---|
| Gross amount | £3,600 (8,000 x 45p) | £3,600 |
| Income tax (40% rate) | £0 | £1,440 |
| Employee NIC (8%) | £0 | £288 |
| Employer NIC (13.8%) | £0 | £496.80 |
| You receive | £3,600 | £1,872 |
| Total cost to company | £3,600 | £4,096.80 |
| Corp tax saved (25%) | £900 | £1,024.20 |
| Net cost to company | £2,700 | £3,072.60 |
The mileage route delivers £3,600 to you at a net cost of £2,700 to the company. The salary route delivers only £1,872 to you at a higher net cost of £3,072.60. That is a significant difference.
If the company reimburses you at more than the approved rate, the excess is treated as earnings — subject to income tax, employee NIC, and employer NIC. It must be reported on a P11D or processed through payroll. Stick to the approved rates and the entire payment stays clean.
HMRC Record-Keeping Requirements
HMRC can enquire into your company’s accounts at any time within the normal compliance window, and mileage claims are a common area of scrutiny. You must be able to produce a contemporaneous mileage log that records:
- Date of each business journey
- Start and end locations (not just “client visit” — name the locations)
- Business purpose of the journey
- Miles driven for each trip
Keep these records for at least six years. A mileage log created retrospectively at year end carries far less weight with HMRC than one maintained journey by journey throughout the year.
Tripbook automates this entire process. The app uses GPS to record each journey as you drive, then lets you classify trips as business or personal with a single swipe. It produces HMRC-compliant mileage reports that you can export directly to your accountant or bookkeeping software — no manual spreadsheets, no guesswork on distances.
For a deeper look at what HMRC expects, see our guide on business mileage record keeping for HMRC.
When a Company Car Might Be Better
The 45p mileage claim is not always the optimal route. If you drive very high business mileage — say 25,000 miles a year or more — the drop to 25p after 10,000 miles starts to erode the advantage. At that level of mileage, a company car (particularly an electric vehicle with a 2% benefit-in-kind rate) can work out cheaper overall because the company claims capital allowances and running costs directly.
The crossover point depends on the vehicle type, your personal tax rate, and fuel costs. For most directors driving between 5,000 and 15,000 business miles per year, the personal car plus 45p mileage claim is more tax-efficient. For a full comparison of the two approaches, see our guide on company car through a limited company.
It is also worth noting that the 45p rate applies equally to electric vehicles. If you own an EV personally and use it for business, you still claim 45p per mile — the same rate as petrol or diesel — even though your actual fuel cost per mile is far lower. This makes EV ownership particularly attractive for directors who claim mileage through their company. For more on electric vehicles and limited companies, see our guide on electric cars through a limited company in 2026.
Start Tracking Your Mileage Properly
The limited company mileage claim at 45p is a well-established, HMRC-approved mechanism — not a grey area or a loophole. As long as your journeys are genuine business travel and your records are complete, the payment is entirely straightforward. The company gets a corporation tax deduction, you receive the money tax-free, and there is no NIC on either side.
The one thing that can undermine this arrangement is poor record keeping. If HMRC enquires and you cannot produce a proper mileage log, the entire claim is at risk — and that means potential back-taxes, interest, and penalties.
Tripbook removes that risk entirely. Every journey is GPS-tracked, time-stamped, and exportable in the format HMRC expects. Whether you process mileage through payroll or your DLA, Tripbook gives you the evidence to back up every claim.
Download Tripbook from the App Store to start building HMRC-compliant mileage records automatically — GPS tracking, digital exports, and cloud backup included.
For the full breakdown of how the 45p rate is structured, see our guide on 45p per mile HMRC explained.
