UK Car Allowance Tax & Mileage Relief Explained | 2025 Guide for Employees & Employers | PTA

Описание: Confused about how car allowance and mileage relief work in the UK?
Whether you’re an employee receiving a car allowance, an employer managing payroll benefits, or a self-employed driver, this video by (PTA) Pro Tax Accountant explains everything you need to know about the UK car allowance tax rules and mileage relief system — updated for the 2025/26 tax year.

We break down how HMRC treats car allowances, mileage claims, fuel reimbursements, and company car benefits so that you understand exactly how much tax you might owe — or reclaim!

🔍 What You’ll Learn in This Video

✅ What is a car allowance and how it differs from a company car
✅ How HMRC taxes car allowance payments in 2025/26
✅ What counts as business mileage and how to claim Mileage Allowance Relief (MAR)
✅ How to calculate mileage using HMRC’s Approved Mileage Allowance Payments (AMAP) rates
✅ What happens if your employer reimburses you less than HMRC’s approved rate
✅ How to claim mileage relief through Self Assessment or P87 form
✅ How car allowances affect National Insurance and your take-home pay
✅ How to avoid double taxation on business journeys
✅ The difference between company car tax (Benefit in Kind) and cash car allowance
✅ How to track and record mileage correctly to stay HMRC-compliant

🚗 What Is a Car Allowance?

A car allowance is a cash payment from your employer to cover the cost of using your own car for business purposes. It’s added to your salary and taxed under PAYE, meaning Income Tax and National Insurance contributions apply — unlike mileage reimbursement, which can be tax-free if claimed at HMRC’s approved rates.

Employers typically offer car allowances as an alternative to providing company cars, giving employees flexibility but also transferring responsibility for vehicle costs, maintenance, and insurance to the employee.

💷 Mileage Relief Rates (2025/26 Tax Year)

According to HMRC’s Approved Mileage Allowance Payments (AMAP):

45p per mile for the first 10,000 business miles per tax year

25p per mile for each additional mile after 10,000

For bicycles, the rate is 20p per mile, and for motorcycles, 24p per mile.

If your employer reimburses you at a lower rate, you can claim Mileage Allowance Relief (MAR) on the difference — either through your Self Assessment Tax Return or using Form P87 if you don’t complete a return.

⚙️ Example Calculation

If you drive 12,000 business miles in a tax year and your employer reimburses you 20p per mile:

HMRC-approved rate for 12,000 miles = £5,000 (45p × 10,000 + 25p × 2,000)

Reimbursed by employer = £2,400 (20p × 12,000)

You can claim Mileage Allowance Relief on the difference (£2,600)

Depending on your tax rate, this could save you up to £1,040 in tax!

📈 Car Allowance vs. Company Car: Tax Differences
Type Taxed As Employee Benefit HMRC Treatment
Company Car Benefit in Kind (BiK) Employer owns car Taxed based on CO₂ emissions & list price
Car Allowance Cash Payment (Salary) Employee owns car Subject to Income Tax & NIC but can claim mileage relief
🧾 How to Claim Mileage Allowance Relief

Keep detailed records of your business journeys (date, purpose, mileage).

Calculate your total approved mileage using HMRC rates.

Deduct any mileage reimbursements already received.

Claim relief through Self Assessment (SA100) or Form P87 online at GOV.UK.

If you are unsure about your eligibility or need help preparing your tax claim, PTA (Pro Tax Accountant) can assist you with accurate calculations, P87 submissions, and tax return optimisation.

📞 Contact Pro Tax Accountant

Need help claiming Mileage Allowance Relief, understanding car allowance taxation, or completing your Self Assessment?
Contact the UK’s trusted tax experts — Pro Tax Accountant (PTA) — today!

📱 WhatsApp / Phone: 07985689912
📧 Email: [email protected]

🌐 Visit: www.protaxaccountant.co.uk

With over 16 years of experience helping individuals and businesses across the UK, PTA ensures you pay no more tax than necessary — and reclaim what’s rightfully yours.

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⚠️ Disclaimer

This video and description are intended for general informational and educational purposes only. They do not constitute financial, tax, or legal advice. While all efforts have been made to ensure accuracy, tax rules and HMRC rates may change. Viewers should seek personalised advice from a qualified professional such as PTA (Pro Tax Accountant) before making financial decisions.
Neither the video creator nor PTA accepts any liability for actions taken based on this content.