Why is my mileage reimbursement being taxed? (UK 2025/26)

Direct answer in 60 words

Your mileage reimbursement is showing up as taxable pay because your employer is paying you above HMRC's Approved Mileage Allowance Payment (AMAP) rates: 45p per mile for the first 10,000 business miles, 25p after, for a car or van. Anything paid above those rates is taxable earnings. Anything paid below can be reclaimed via Mileage Allowance Relief on your tax return.

The Reddit-style scenario, worked through

The most common confusion looks like this: you drive 4,000 business miles in the year for your employer in your own car. Your employer reimburses you at 60p per mile, total £2,400. On your next payslip (or year-end P11D), part of that reimbursement appears as taxable pay rather than a clean expense refund. Nothing has gone wrong — HMRC's AMAP cap is doing exactly what it is designed to do.

Here is the maths:

• Tax-free under AMAP: 4,000 miles × 45p = £1,800.
• Taxable excess: £2,400 − £1,800 = £600 of taxable pay.
• If you are a basic-rate taxpayer: roughly £120 Income Tax + about £48 Class 1 NIC = £168 deducted.
• If you are a higher-rate taxpayer: roughly £240 Income Tax + about £12 Class 1 NIC = £252 deducted.

The £1,800 tax-free portion is paid in full and never touches your tax record. Only the £600 excess is treated as earnings and runs through PAYE.

National Insurance figures are illustrative — the exact NIC on the excess depends on where the £600 sits relative to your Primary Threshold and Upper Earnings Limit for the pay period in which it is paid.

The AMAP rates for 2025/26 in one table

These rates are set in the Income Tax (Earnings and Pensions) Act 2003 and have been frozen since 2011/12. They are the tax-free ceiling — employers can pay less (or nothing) and the gap is your problem to reclaim, not theirs to pay.

What the AMAP rate is supposed to cover

The 45p / 25p is a flat allowance for the whole running cost of using your own car for business: fuel, insurance, road tax, MOT, servicing, depreciation, breakdown cover. You cannot claim any of those separately on top of AMAP. Parking and tolls incurred on a business trip are a separate matter and can be reimbursed tax-free in addition to mileage.

When reimbursement becomes taxable — the rule in one line

Tax-free amount = business miles × AMAP rate for the vehicle. Anything paid above this is taxable earnings. The excess is added to your gross pay and taxed through PAYE; it also attracts Class 1 NIC on both sides. The employer is required to report it (either through payroll or on form P11D) and that is the line that shows up as "taxable mileage" or similar on your payslip.

When you are owed money back — Mileage Allowance Relief (MAR)

The mirror case is more common than people realise. If your employer pays less than the AMAP rate — say 30p per mile when the approved rate is 45p — the shortfall is tax-relievable through Mileage Allowance Relief.

Worked example. You drive 6,000 business miles in 2025/26 at 30p per mile reimbursement.

• Approved amount under AMAP: 6,000 × 45p = £2,700.
• Employer paid: 6,000 × 30p = £1,800.
• Shortfall: £900.
• Tax relief at basic rate (20%): £180 back.
• Tax relief at higher rate (40%): £360 back.

You claim MAR through Self Assessment (box on the employment pages) or, if your total job-related expenses for the year are under £2,500 and you are not already in Self Assessment, by filing a P87 form with HMRC. Claims can be backdated up to four tax years.

Self-employed delivery and rideshare drivers — same rates, different mechanics

If you drive for Uber, Deliveroo, Just Eat, Amazon Flex or a courier company as a self-employed sole trader rather than an employee, AMAP and MAR do not apply to you in the employment sense — there is no employer reimbursement to compare against. But HMRC's simplified mileage rules for the self-employed mirror the AMAP rates exactly: 45p per business mile for the first 10,000, 25p after, in a car or van (24p flat for motorcycles).

For a side-hustle driver this is usually the cleanest option. You log business miles, multiply by the rate, and deduct the result from your gross delivery / rideshare income. You cannot also claim fuel, insurance, MOT, repairs or capital allowances on the same vehicle — it is simplified mileage or actual costs, and the choice is locked in for the life of that vehicle as a business asset.

Model your own delivery side hustle using the delivery driver tax calculator: enter gross platform income in Side Hustle Income and (business miles × 45p / 25p) in Side Hustle Expenses. For a deeper walk-through of the allowance vs actual expenses decision, see side hustle tax expenses: what you can (and can't) deduct.

Common confusions

1. "45p is what my employer owes me." No. It is the tax-free ceiling, not a minimum employers must pay. If your contract says 30p, that is the rate — but you can reclaim the gap via MAR.
2. "The taxable excess is double tax." No. The reimbursement is paid to you in full. The excess is treated as earnings on top of your salary, so the tax / NIC on it is the same as you would pay on any extra wages.
3. "The 10,000-mile band is lifetime." No. It resets every tax year on 6 April, and resets again if you switch employer mid-year.
4. "My commute counts." Almost never. Travel to a permanent workplace is private mileage. Travel to a temporary site, between work locations, or to a client visit does qualify.
5. "I can claim AMAP and my actual fuel receipts." No. AMAP covers all vehicle running costs. You can only claim parking and tolls on top.
6. "As a self-employed driver I can use AMAP for some trips and actual costs for others." No — for each vehicle you must pick one method and stick with it for as long as that vehicle is in the business.

Step-by-step: claiming Mileage Allowance Relief on a shortfall

1. Add up your business miles for the tax year (keep dates, destinations and purpose).
2. Multiply by 45p (first 10,000) and 25p (above 10,000) to get the AMAP total.
3. Subtract what your employer actually paid in mileage reimbursement.
4. The shortfall is the amount on which you can claim tax relief at your marginal rate.
5. If you are in Self Assessment, enter it in the "Expenses" section of the employment pages.
6. If not, and your total expenses claim is under £2,500, file a P87 on GOV.UK.
7. Repeat for each of the last four tax years you have not already claimed — backdated MAR is allowed.

This page is general guidance, not personal tax advice. Edge cases — company cars (different rules apply via the Advisory Fuel Rates), passenger payments, leased vehicles or salary sacrifice arrangements — should be checked against the official GOV.UK sources below or with a qualified adviser.