If you run your own limited company and use your personal car for business trips, you can claim mileage. The short answer is yes, you can claim mileage as a limited company director. Your company pays you a tax-free mileage allowance, and the company deducts that cost against its corporation tax bill. Done correctly, this is one of the simplest and most tax-efficient ways to handle business travel costs through your company.
But there are rules. Use the wrong rates. Mix personal and business trips without separating them. Skip the mileage log. Any of those mistakes can turn a straightforward claim into an HMRC enquiry. This article covers exactly what counts as business mileage, the rates for 2025/26, how to record it, and what happens when you use a company car instead.
What Counts as Business Mileage for a Director?
HMRC draws a clear line between business travel and private travel. Business mileage is any journey you make wholly and exclusively for the purpose of your company's trade. That includes:
- Travel to meet a client at their premises
- Trips to suppliers or subcontractors
- Journeys between your office and a temporary workplace (more on that below)
- Travel to networking events, trade shows, or industry seminars
- Trips to the bank, post office, or accountants for business reasons
- Travel between different sites your company operates from
What does not count as business mileage? Your daily commute. If you work from a fixed office location, the journey from your home to that office is private travel. That rule catches a lot of directors out. If you have a dedicated office you use regularly, HMRC treats that as your permanent workplace, and the travel there is commuting, not business mileage.
There is an important exception. If your home is your main place of business and you have no other fixed office, then journeys starting from home to a client site can count as business mileage. You need to show that your home is genuinely your base of operations. That means having a dedicated workspace, holding meetings there, and running the business from that address. A spare room with a laptop qualifies. The dining table used occasionally does not.
If you work from home but also rent a co-working space or an office, the position gets more nuanced. The co-working space may be a temporary workplace if you use it infrequently, or a permanent workplace if you use it regularly. The distinction matters because travel between home and a permanent workplace is commuting. Travel between home and a temporary workplace can be business mileage.
HMRC Approved Mileage Rates for 2025/26
HMRC publishes Approved Mileage Allowance Payments (AMAPs). These are the rates your company can pay you tax-free for business miles in your personal car. The rates for 2025/26 are:
- Cars and vans: 45p per mile for the first 10,000 business miles in a tax year, then 25p per mile thereafter
- Motorcycles: 24p per mile
- Bicycles: 20p per mile
The 45p rate applies per vehicle, not per director. If you and your spouse both use the same car for business, the 10,000 mile threshold applies to the car, not to each person individually. In practice, for most directors the 45p rate covers all their business miles because few directors drive more than 10,000 business miles per year in their personal car.
Your company pays you the mileage allowance. The company deducts the full amount as an allowable expense against corporation tax. You receive the payment tax-free. There is no National Insurance on mileage payments made at or below the approved rates. That makes it significantly more efficient than paying yourself extra salary to cover fuel costs.
Here is a worked example. A director in Birmingham drives 8,000 business miles in 2025/26 in their personal car. The company pays them 45p per mile, which is £3,600. The company saves 19% corporation tax on that £3,600, a saving of £684. The director receives £3,600 tax-free. If the director had instead paid for fuel from their net salary, they would need to earn roughly £5,500 gross to have £3,600 after tax and NI. The mileage claim saves both the company and the director money.
What If Your Company Pays You More or Less Than the Approved Rate?
You have flexibility here, but the tax treatment changes depending on which direction you go.
If the company pays less than 45p per mile: You can claim the difference as a tax deduction on your personal Self Assessment return (form SA100). For example, if your company pays you 25p per mile, you can claim the remaining 20p per mile as a tax deduction against your personal income tax. You do this using form P87 or via your Self Assessment tax return. The company still deducts the 25p it paid.
If the company pays more than 45p per mile: The excess over 45p is taxable as earnings and subject to PAYE and National Insurance. So if the company pays you 60p per mile, the first 45p is tax-free, and the remaining 15p is treated as additional salary. That extra salary attracts income tax and employer NI. It defeats the purpose of the mileage allowance. Stick to the approved rate.
For most directors, the cleanest approach is to pay exactly the AMAP rate and claim nothing extra personally. One transaction. One record. No extra tax return entries.
How to Record Mileage Properly
HMRC does not require a specific form or template, but they do require a contemporaneous record. That means you record the mileage at or around the time of the journey, not six months later when you reconstruct it from memory. A reconstructed log carries less weight if HMRC enquires.
Your mileage log should include for each journey:
- The date of the journey
- The start and end locations (full addresses or postcodes)
- The purpose of the journey (client meeting, supplier visit, bank run)
- The number of business miles driven
- The total mileage on the odometer at the start and end of the journey (optional but recommended)
You can keep this log in a spreadsheet, a notebook kept in the glovebox, or using mileage tracking apps. Apps like MileIQ, Driversnote, and the mileage tracking features in Xero and FreeAgent automate some of this. They use GPS to log journeys and let you classify each trip as business or personal with one tap. For directors who drive frequently, an app is worth the small subscription fee. For directors who drive a few times a month, a simple spreadsheet works fine.
Keep your mileage records for at least six years after the end of the tax year they relate to. HMRC can ask to see them up to that point. If you cannot produce records, they may disallow the deduction and charge tax, interest, and penalties.
Company Car vs Personal Car: Which Is Better?
Some directors buy a car through their limited company instead of using their personal car and claiming mileage. The choice depends on your mileage pattern and the type of car.
Using your personal car and claiming mileage is usually simpler. You own the car personally. The company pays you 45p per mile for business use. You cover all the running costs (fuel, insurance, servicing, repairs, tax, MOT) from that 45p. The company has no involvement in the car's costs beyond the mileage payment. No benefit in kind. No fuel benefit charge. No capital allowances to calculate.
Buying a car through the company works better if you drive high business mileage (15,000+ miles per year) and choose a low-emission car. The company can claim capital allowances on the purchase cost. For a new electric car, the company gets 100% First Year Allowances, meaning the full cost is deductible against corporation tax in the year of purchase. The company also deducts all running costs. The downside is the benefit in kind charge on your personal tax return. For electric cars, the BIK rate is just 2% in 2025/26, so the personal tax cost is minimal. For petrol or diesel cars, BIK rates range from 12% to 37%, making company car ownership expensive for the director personally.
For most directors of small limited companies, using a personal car and claiming 45p per mile is the better option. It keeps the company's affairs simple and avoids benefit in kind reporting on form P11D. If you are considering a company car, run the numbers for your specific mileage and car choice. The mileage and company car calculators on our site can help you compare the two options.
Can You Claim Mileage for a Vehicle You Lease Personally?
Yes. The AMAP rules apply to any vehicle you own or lease personally. If the car is in your name and you lease it personally, you can still claim 45p per mile from your company for business journeys. The lease payments are your personal responsibility. The company does not get involved. The mileage allowance covers the lease cost, fuel, insurance, and everything else.
This is a common structure for directors who want a nicer car than the company could justify buying. You lease the car personally. The company pays you mileage for business trips. You cover the personal use costs yourself. It works well provided you keep a clean mileage log separating business from personal journeys.
What About Electric Cars?
The AMAP rate for electric cars is the same 45p per mile as for petrol or diesel cars. There is no separate lower rate for electric vehicles. That makes electric cars particularly attractive for directors claiming mileage because the actual running cost per mile for an electric car is much lower than 45p. You pocket the difference tax-free.
If you charge your electric car at home and claim mileage from the company, the 45p per mile covers the cost of electricity. You cannot also claim the home electricity cost separately. The mileage rate is all-inclusive.
If your company owns an electric car and you charge it at home, the company can reimburse you for the cost of electricity used for business charging. HMRC accepts a rate of 7p per mile for electric cars charged at home, or you can use the actual cost per kilowatt hour if you have a separate meter. Check our VAT and MTD guidance for how to handle the VAT on electric car charging.
Mileage and VAT
If your company is VAT registered, you can reclaim VAT on fuel costs for business mileage, but only if you use the HMRC approved method. The simplest approach is to use the fuel scale charge if your company pays for all fuel (personal and business) for a company car. For personal cars used for business, the company reclaims VAT on the mileage payment itself, not on the fuel directly.
In practice, most small limited companies do not reclaim VAT on mileage. The 45p per mile rate is VAT inclusive for the fuel element. If your company wants to reclaim VAT on fuel, speak to your accountant about the advisory fuel rates HMRC publishes quarterly. The Holloway Davies team can advise on whether VAT recovery on mileage is worthwhile for your specific circumstances.
Common Mistakes Directors Make
Claiming mileage for the commute. This is the most common error. Travel from home to your regular office is not business mileage. If HMRC enquires and finds you claimed commuting as business mileage, they will disallow the deduction and may charge penalties.
Not keeping a mileage log. HMRC accepts estimates only in very limited circumstances. If you cannot produce a log, expect the claim to be challenged. A log kept in a notebook or app takes five minutes per week and saves hours of hassle later.
Paying mileage to a director who uses a company car. If the company provides a car, the director cannot also claim mileage for business trips in that car. The company covers the running costs directly. The director may need to report a fuel benefit if the company pays for private fuel.
Confusing business mileage with travel to a temporary workplace. A temporary workplace is somewhere you attend for a limited duration (usually less than 24 months). Travel from home to a temporary workplace can be business mileage. Travel from home to a permanent workplace is not. If you work at the same client site every day for two years, that site becomes a permanent workplace, and the travel becomes commuting.
Not updating the mileage rate when HMRC changes it. HMRC reviews the AMAP rates annually. The 45p rate has been stable for several years, but it can change. Using an out of date rate can create a tax charge on the excess.
How Holloway Davies Can Help
We handle mileage claims for directors across every sector: tradespeople driving to sites, consultants visiting clients in London and Manchester, ecommerce directors travelling to suppliers, and creative freelancers attending shoots and meetings. The principles are the same, but the specific records and rates depend on your vehicle, your mileage pattern, and whether you use a personal or company car.
As ICAEW qualified accountants, we review your mileage records as part of your year-end accounts and corporation tax return. We check that the rates are correct, the business purpose is clear, and the deduction is properly reflected in the CT600. If HMRC ever enquires, we handle the correspondence and evidence submission.
If you are a director and you have been paying for business fuel out of your own pocket without claiming mileage, you may have missed significant tax savings. We can help you reconstruct a reasonable claim for previous years and set up a proper mileage process going forward. Get in touch through our contact page or call the office to discuss your situation.