Mileage policy template for UK SMEs
A one-page policy aligned with HMRC, UK employment law and GDPR. Ready to adopt.
Why a written policy matters
UK SMEs without a written mileage policy face three risks: HMRC may treat reimbursements as taxable income, employees may dispute calculations and timing, and the company has no defensible audit trail in case of investigation.[^hmrc-rates-allowances] A one-page policy fixes all three for under an hour of work.
Template (one page)
1. Scope
This policy applies to all employees and directors of [Company Ltd] who use a personal vehicle for company business. It does not cover ordinary commuting (home–permanent workplace) or private use.
2. Approved rates
We pay the HMRC AMAP rates: 45p per mile for the first 10,000 business miles in a tax year and 25p per mile thereafter. Motorcycles: 24p. Bicycles: 20p. Passenger payments: 5p per mile per qualifying business passenger.
3. Eligible journeys
Included: visits to clients, suppliers, between work locations, to a temporary workplace (under the 24-month rule), and work-related training.
Excluded: home to permanent workplace; private trips; trips where you are reimbursed by a client separately.
4. Submission and approval
Mileage claims must be submitted within 30 days of the journey via the company's expense system. Each claim must include: date, origin, destination, business purpose, miles, vehicle. Claims are approved by the line manager and processed in the next monthly payroll cycle.
5. Records
The company retains mileage records for 6 years (HMRC requirement: 22 months for Income Tax, but VAT and corporation tax can require longer). Employees may request access to their records under UK GDPR.
6. VAT and AFRs
For VAT recovery on the fuel element of AMAPs, employees must retain fuel VAT receipts dated within the relevant quarter and submit them with a cumulative value sufficient to cover the VAT reclaimed.
7. Excess payments
If, in exceptional cases, the company pays above the AMAP rate, the excess is taxable and reportable on the P11D, and the employee is responsible for the additional tax via Self-Assessment if requested.
8. Compliance and disciplinary
Falsifying mileage claims is treated as gross misconduct under the disciplinary procedure and may result in dismissal and recovery of overpayments.
9. Review
This policy is reviewed annually by the Finance team or whenever HMRC updates AMAP or AFR rates.
How to deploy
1. Get sign-off from the directors and (if applicable) the company secretary. 2. Issue as a circular to all employees with a signed acknowledgement form. 3. Upload to the staff handbook or intranet. 4. Configure your expense tool (Quilometragem, Concur, etc.) with the AMAP rate and the 30-day submission window. 5. Diary an annual review for the first week of April (start of the new tax year).
A note on hybrid car allowance + AMAP
Many UK SMEs combine a flat car allowance (taxed as salary) with AMAPs on actual business mileage. This is allowed by HMRC: the car allowance is part of pay (subject to Income Tax and NIC), and AMAPs at 45p/25p are tax-free on top. Employees should still be eligible for MAR if the AMAP-equivalent of any flat "mileage allowance" comes in below HMRC's rates.
Bottom line
A one-page policy covers HMRC, employment law and GDPR. Combine it with a digital expense system and you remove the most common cause of payroll disputes and tax exposure in UK SMEs.