Milage rates applicable for a private and company car

Grumpy_chap

https://forums.moneysavingexpert.com/discussion/comment/81908762#Comment_81908762

It might be an EV.

For the OP, they receive a car allowance and pay NI plus Income Tax at the appropriate rate on that car allowance.

They do, say, 1k miles and receive "mileage" at 7 pence per mile.

HMRC would permit mileage at 45 pence per mile (reduces above 10k miles).

Difference 45 - 7 = 38 pence per mile. £380 over the 1k miles.

OP can claim tax relief against that £380. Results in a lower tax bill arising. £76 lower for a 20% tax payer.

Albermarle

It might be an EV.

Good point !

cc123mm456

From the first post:

- It is an electric car

I get paid a car allowance from my work (in addition to my salary) and this is taxed.

To explain why HMRC will only give tax relief and not pay you the full 45p per mile.

In this situation, the employer has already paid you the approximate costs to buy and run the car. This payment is subject to tax and NIC, because it is a benefit of your employment (bearing in mind that the car will be for both business and personal use). Note that company car drivers will also be subject to additional tax on their company car, because it is a taxable "Benefit in kind" (BIK).

The approved mileage rate (AMR) of 45ppm (up to the first 10,000) miles is the rate that is allowed by HMRC, for companies to pay to employees that use their own private car for business mileage when the employer has not contributed anything to the capital cost and running cost of the car. In other words, it is HMRCs assessment of the approximate total cost to the employee for providing the use of their personal car for the business use, including fuel, wear and tear, and capital cost. It is of course very approximate, and in fact it hasn't been changed for a number of years.

The Advisory Fuel Rate (AFR) is calculated by HMRC for many different car fuel types, and engine sizes, and it is the approximate actual cost of fuel. HMRC update the AFR every 3 months (the last update was 1st March 2026), and they show their workings on the web page that I linked earlier. The main purpose of this rate is for employers to pay the fuel only cost to employees with a company car (or when employers pay for all the fuel via a fuel card, for the employee to reimburse the employer for their private mileage).

However, in your situation, it is also an appropriate rate for the employer to use, for the fuel only element of your business mileage.

Sometimes, your actual cost will not match exactly the AFR, because you are free to choose any car on the market, and some will be more economical than others. It is supposed to be an average cost based on the most common cars with the fuel type and the average cost of the fuel (electricity in this case).

Your employer has paid a car allowance that is taxed, and to HMRC this is just additional salary. Therefore, from HMRC's point of view, you can claim the tax relief at the AMR of 45ppm, to offset some of the tax you have paid on that taxable car allowance.

From the company's point of view, they have paid you for the annual capital and running costs of the car, which is the car allowance. Then they have paid your out of pocket expenses for business mileage at the appropriate rate.

One question remains. Do you only charge at home? If so you are being paid the correct rate.

If for example your company requires you to travel a long way from home, perhaps with an occasional overnight stay, then you might be forced to use a public charger, and in that situation your out of pocket expense cost would be higher. You could ask the company to consider using the published HMRC rate for charging at a public charger, but only where it is appropriate. Of course, the company may decide that their policy is to only pay the home charger rate anyway.

I hope that this helps.