Standard Mileage Pay – Simple Guide for Employers and Drivers
Ever wondered why a driver asks for mileage pay after a long trip? It’s not a bonus, it’s a reimbursement for the cost of using their own vehicle. In the UK we call it standard mileage pay, and it’s a straight‑forward way to cover fuel, wear and tear, and insurance when staff travel for work.
What Is Standard Mileage Pay?
Standard mileage pay is a set rate that companies pay per mile (or kilometre) when an employee uses a personal car for a business job. The rate is usually fixed by HMRC for tax‑free reimbursement. For 2025 the approved mileage allowance for cars is £0.45 per mile for the first 10,000 miles and £0.25 per mile after that. Anything you pay below those numbers is tax‑free, anything above it might attract tax.
The purpose is simple: make sure the driver isn’t out of pocket for fuel, tyre wear, or the extra insurance cost that comes with extra miles. It also keeps bookkeeping easy because you use a single number instead of tracking every fuel receipt.
How to Calculate It Correctly
Step 1 – Record the trip. Write down the start and end points, total miles, and why the trip was needed. A quick spreadsheet or a mileage app does the job.
Step 2 – Check the HMRC rate. Use £0.45 per mile for the first 10,000 business miles in a tax year, then drop to £0.25 per mile.
Step 3 – Multiply. If a driver travelled 120 miles for a move, the calculation is 120 × £0.45 = £54. That’s the amount you can reimburse tax‑free.
Step 4 – Add any extra costs. If the job required a heavy load or a special vehicle, you might add a flat extra charge, but keep it clear in your records.
Step 5 – Pay and log it. Pay the driver the agreed amount and note it in your payroll system as mileage reimbursement. This keeps everything transparent for both sides.
Example: Jane drives from London to Birmingham (120 mi) to deliver a sofa for a client. She logs the mileage, you apply the £0.45 rate, and she gets £54 added to her payslip. No tax, no hassle.
Why stick to the standard rate? Because it’s accepted by HMRC, it avoids tax headaches, and it’s easy to explain to staff. If you pay more, you’ll need to report the extra as a benefit and handle the tax. If you pay less, drivers might feel short‑changed and could claim the difference back.
Keeping good records also protects you in case of an audit. A simple mileage log, the purpose of each trip, and the rate applied are enough to show everything is above board.
At Dex Removals & Logistics Services we use the standard mileage pay for any driver who takes a company vehicle home or uses their own car for a relocation job. It helps us keep costs predictable and makes sure our team feels fairly treated.
Ready to set up mileage pay for your business? Start by choosing a reliable mileage‑tracking method, apply the HMRC rates, and add the reimbursement to your payroll routine. You’ll save time, stay tax‑compliant, and keep your drivers happy.
April 27, 2025
Evelyn Wescott
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