Car Allowance vs Mileage Calculator

Q: Is this the same as company car tax?

No. A company car has separate benefit-in-kind rules.

Compare a taxable car allowance with HMRC mileage payments and mileage tax relief for business miles.

Enter Pay And Miles

Annual Car Allowance £ Gross allowance before income tax and National Insurance. Tax Band For Allowance Use your marginal rate for the allowance estimate. Employee NI Estimate % Set to 0 if you only want the income tax view. Business Miles In Year miles Exclude ordinary commuting unless your tax adviser says it qualifies. Employer Mileage Paid p/mile Enter the pence per business mile your employer pays on top. Private Miles miles Used for ownership cost checks, not for AMAP relief. Estimated Running Cost p/mile Fuel, tyres, servicing, insurance, finance and depreciation estimate. Tax Year The AMAP car rates remain 45p and 25p in these fields unless HMRC changes them.

Example Patterns

Comparison Result

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HMRC Mileage Rates For Cars

HMRC Approved Mileage Allowance Payments for cars and vans are 45p per mile for the first 10,000 business miles in the tax year, then 25p per mile for extra business miles. If an employer pays less than the approved amount, an employee may be able to claim tax relief on the shortfall. If an employer pays more than the approved amount, the excess can be taxable. This page estimates the cash comparison; it is not payroll or tax advice.

Business Mileage Band	HMRC Car Rate	How It Is Used
First 10,000 business miles	45p per mile	AMAP benchmark for cars and vans
Business miles above 10,000	25p per mile	Lower HMRC rate for extra miles
Employer pays below rate	Shortfall may qualify for tax relief	Relief is based on tax rate, not cash reimbursement
Employer pays above rate	Excess can be taxable	Payroll treatment may be needed
Ordinary commuting	Normally excluded	Do not add home-to-work miles without advice

Comparison Formula

Net allowance: gross allowance minus estimated income tax and employee NI.

HMRC benchmark: first 10,000 business miles x 45p, plus extra miles x 25p.

Tax relief estimate: shortfall between HMRC benchmark and employer mileage paid x marginal income tax rate.

Net position: net allowance + employer mileage paid + tax relief – estimated vehicle running cost.

1 Enter only business miles that qualify under HMRC rules.

2 Compare the employer’s pence per mile with the AMAP benchmark.

3 Deduct estimated tax and NI from the car allowance, because it is normally pay.

4 Add your own running-cost estimate to see whether the package covers the car.

What The Result Does Not Decide

This comparison does not decide whether a specific trip qualifies as business travel, whether your mileage log is acceptable, whether your employer’s payroll treatment is correct, or whether a company car would be better. Company cars, fuel cards, salary sacrifice, electric vehicles, vans, directors, hybrid work and temporary workplaces can all change the answer. Keep mileage records, employer policy, payslips and P11D or payroll documents with your figures.

Worked Examples

6,000 Business Miles

AMAP benchmark: 2,700 pounds. A large allowance may beat mileage-only cash, but running costs still matter.

12,000 Business Miles

AMAP benchmark: 5,000 pounds, made from 10,000 miles at 45p and 2,000 at 25p.

Employer Pays 15p

Relief check: the shortfall can create tax relief, but it is not the same as receiving the full shortfall in cash.

Car Allowance And Mileage Record Checklist

Record	Why It Matters	Common Problem
Business date and purpose	Shows why the trip was for work	Vague diary notes
Start and end points	Supports mileage claimed	Only keeping total miles
Employer policy	Confirms pence per mile and caps	Assuming HMRC rate is paid automatically
Payslip allowance line	Shows tax and NI treatment	Comparing gross allowance with net mileage
Vehicle running costs	Checks whether the package covers ownership	Ignoring tyres, servicing and depreciation
Fuel card or company fuel	Can alter taxable benefit	Counting fuel twice
Private miles	Useful for ownership cost split	Putting private miles into AMAP relief
Tax relief claim	May recover part of shortfall	Expecting full shortfall back

Allowance Versus Mileage In Plain Cash Terms

A car allowance is usually paid as salary. That means income tax and employee National Insurance can reduce the amount that reaches your bank account. Mileage payments are different: payments up to the approved HMRC mileage amount can be made without tax for qualifying business miles. The better option depends on business mileage, your tax band, the employer’s mileage rate, and the true cost of providing your own car.

High business mileage can make pence-per-mile support valuable, especially when the allowance is small or heavily taxed. Low business mileage can make an allowance look attractive, but it may still fail to cover finance, insurance, servicing and depreciation. The calculator separates cash received from running cost so the trade-off is visible.

FAQs

Is a car allowance taxable?

In many payroll arrangements, a car allowance is treated like cash pay and is subject to income tax and National Insurance. Check your payslip and employer policy. This page estimates the deduction from your marginal rates; payroll may differ.

What are the HMRC mileage rates for cars?

For cars and vans, the approved mileage amount is 45p per mile for the first 10,000 business miles in the tax year, then 25p per mile for extra business miles. These are not a legal minimum that every employer must pay.

Can I claim mileage tax relief if my employer pays less?

You may be able to claim tax relief on the difference between the HMRC approved amount and what your employer pays for qualifying business miles. The relief is based on your tax rate, so it is not the same as receiving the full shortfall.

Should commuting miles be included?

Ordinary commuting is normally not included. Temporary workplace and business travel rules can be detailed, so check HMRC guidance or ask a tax adviser if the route is not straightforward.

Does the calculator include employer National Insurance?

No. It focuses on the employee cash position. Employer NIC, payroll reporting and company policy may matter for employers but are outside this employee comparison.

How should I estimate running cost per mile?

Include fuel, insurance, servicing, tyres, repairs, finance interest and depreciation. If you only include fuel, the allowance may look better than it is.

Is this the same as company car tax?

No. A company car has separate benefit-in-kind rules, and electric or low-emission cars can change the comparison. Use this page for cash allowance versus private-car mileage support only.

Sources

HM Revenue and Customs. (n.d.). Expenses and benefits: Business travel mileage for employees’ own vehicles. GOV.UK. https://www.gov.uk/expenses-and-benefits-business-travel-mileage
HM Revenue and Customs. (n.d.). Claim tax relief for your job expenses: Vehicles you use for work. GOV.UK. https://www.gov.uk/tax-relief-for-employees/vehicles-you-use-for-work
HM Revenue and Customs. (2026). Advisory fuel rates from 1 March 2026. GOV.UK. https://www.gov.uk/guidance/advisory-fuel-rates