What is Tax Relief on Fuel?

Taxpayers can claim tax relief on the fuel they buy to make some journeys that are part of their job or as a self employed individual.

The amount of tax relief on fuel you can claim depends on how many qualifying miles you are driving for work, and how much you are paid by your employer (if anything) as a mileage allowance.

Whether you’re an employee making occasional business trips or self-employed with regular work-related travel, HMRC allows you to claim mileage tax relief on these expenses.

Navigating the mileage tax relief rules and submission process can be confusing, which is why many eligible taxpayers never actually claim what they’re owed.

From understanding what qualifies as business travel to choosing the best claim method for your situation, we’ll cover what you need to know to maximise your tax relief while staying fully compliant with HMRC requirements.

With the cost of using your own car for work being so expensive claiming the tax back on your petrol or diesel costs is not something you can afford to miss out on.

What mileage qualifies for fuel tax relief?

Before filing your mileage claim, you need to understand exactly what mileage tax relief covers and when you’re eligible. HMRC has specific rules about what qualifies for relief and what doesn’t.

You cannot claim for ordinary commuting between your home and what HMRC states is a permanent workplace which can be found in HMRC booklet 490: Employee travel, section 4.7.

This restriction applies regardless of distance or cost, as HMRC considers commuting a personal expense.

Eligibility for fuel tax relief for employees under PAYE:

As an employee, you can claim mileage tax relief when you use your personal vehicle for qualifying business journeys and typically meet these criteria:

• Your business mileage only involves travel to a temporary workplace which usually lasts for 24 months or less.
• You must use your own vehicle (car, van, motorcycle or bicycle) for work-related travel.
• The journeys must be exclusively for business purposes (not personal or commuting).
• Your employer hasn’t already fully reimbursed you at or above HMRC’s approved rates.
• You have HMRC compliant mileage records to support your claim.

Approved mileage rates for fuel

The tax office has approved mileage rate payments which tell you how much tax relief on your petrol or diesel you can claim.

The amounts you can claim per mile for vehicles are:

• .45p per mile for the first 10,000 business mile and .25p per mile for each mile after.
• Motorcycles: .24p per mile
• Bicycles: .20p per mile

Tax relief on fuel example

What you’re claiming back from HMRC is tax relief on your claim total – not the full amount itself.

Accordingly, a basic rate taxpayer would receive 20% of the unclaimed allowance, while higher rate taxpayers would receive 40%.

Example:

• A sales rep travels 9,000 miles at 45p per mile = £4,050
• Mileage on £4,050 paid at 20% tax relief = £810

In this example you don’t get back the total mileage claim of £4,050 as a tax rebate.

You will receive either 20% or 40% of the total, depending on the rate at which you pay income tax.

If you pay tax at 20% you would receive a mileage tax rebate @ 20% of £4,050, which is £810.

If  you were in the higher rate income tax bracket, you would get a mileage tax rebate @ 40% of £4,050, which is £1,620.

Fuel expenses reimbursed by your employer

If you are reimbursed for your petrol or diesel by your employer and the mileage paid to you is not taxed, the amount has to be taken into consideration.

• If your employer reimburses you at exactly the approved rates (45p per mile for the first 10,000 miles and 25p thereafter), you can’t claim additional relief unless your mileage is taxed along with your salary under PAYE.
• If your employer reimburses below HMRC’s approved rates, you can claim mileage allowance relief (MAR) on the difference. For instance, if your employer pays 30p per mile and you drove 7,000 business miles, you could claim relief on the 15p per mile difference.

Use the mileage tax relief calculator

The mileage tax relief calculator can help you work out how much tax back on your fuel you could be owed.

All you have to do is enter your total work mileage and select your tax bracket, and you will be given an estimation of the mileage tax rebate you could be owed.

Can you claim fuel relief for electric vehicles?

Yes, electric car drivers can claim 45p per mile for the initial 10,000 miles when using their personal vehicle for work-related travel.

Workers driving private electric vehicles can claim up to 45p per mile for the first 10,000 miles, followed by 25p per mile afterwards through the approved mileage allowance payments system.

This tax exempt allowance covers all electric vehicle costs, including charging expenses, depreciation, and insurance.

Claiming tax back on petrol important facts:

• If you are paid a taxed mileage allowance from your employer the full mileage rates can still be claimed.
• Fuel expenses can be reimbursed for the last four tax years.
• You don’t have to be with the same employer to claim mileage.
• You don’t have to be paid a fuel allowance from your employer to have a valid claim.

How to claim your fuel tax relief from HMRC

You can apply for your mileage claim online using the self assessment system or a P87 form.

HMRC expect you to use a P87 if your mileage claim has a value of below £2,500 and a tax return for claims above this threshold.

• P87 form: Use this if your claim is less than £2,500 and you don’t normally complete a self assessment tax return. The P87 can be submitted online through your HMRC personal tax account or by post.

For online P87 claims, log in to your personal tax account and navigate to the ‘Tax relief for expenses of employment’ section.

You can download the P87 form from the HMRC website, complete it, and send it to: Pay As You Earn and Self Assessment, HM Revenue and Customs, BX9 1AS.

• Self assessment tax return: This is mandatory if your claim exceeds £2,500 or if you already complete Self Assessment for other reasons. Self-employed individuals must always use Self Assessment, entering mileage expenses in the Self-Employment section.

It’s a wise idea to get all your mileage paperwork in order before you make your claim.

Your mileage records should be attached to your P87 claim form but not to a self assessment tax return but you should keep your information ask for evidence after your tax return has been processed.

HMRC will let you know the timescale for review and processing your claim. And then you’ll get your mileage tax refund typically by BACS transfer.

Self-employed fuel tax relief

Self-employed individuals face slightly different rules when claiming business mileage and you’ll include these expenses when completing your self assessment tax return.

If you’re self-employed, you can claim mileage expenses provided:

• You’re a sole trader or in a partnership.
• The vehicle is used for legitimate business journeys.
• You maintain detailed mileage logs and supporting documentation.
• You haven’t previously claimed capital allowances for the same vehicle.

Sole traders can choose between two methods: simplified expenses (using HMRC’s flat rates) or actual costs.

Once you’ve selected a method for a vehicle, you must continue using that same method for as long as you use that vehicle in your business.

Simplified expenses can be particularly beneficial for self-employed sole traders with modest annual mileage, as they involve less record-keeping than tracking actual costs.