Can You Claim VAT on Mileage in the UK?: Guide for Business Owners

Claiming VAT on Mileage

Can You Claim VAT on Mileage in the UK?

Yes, you can claim VAT on mileage in the UK, but only on the fuel part of the mileage allowance — not the whole amount you or your business pay per mile. HMRC sets out advisory fuel rates that show how much of each mile relates to fuel. If your business is VAT registered and you have valid VAT fuel receipts, you can reclaim the VAT on this fuel element.

 

For example, if you drive your personal car for work and your company pays you 45p per mile, the full 45p covers fuel, wear and tear, insurance, and servicing. VAT can only be reclaimed on the fuel portion, not on the whole 45p. To calculate this, you use HMRC’s advisory fuel rates (which change every quarter), multiply them by your business miles, and then apply the current VAT rate (20%).

 

So, while you can’t claim VAT back on the total mileage allowance, you can still save money by reclaiming the VAT on the fuel element — provided you keep receipts and accurate mileage logs.

If you drive your own vehicle for business journeys, you may be able to make a VAT on mileage claim. Many business owners and employees don’t realise that they can claim VAT on mileage – but it can add up to significant savings over the year. This guide breaks down everything you need to know about VAT on mileage claims, helping you understand what’s allowed and how to do it properly.

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What Does “Claiming VAT on Mileage” Mean?

When you drive for work in your personal vehicle, your employer (or your business) can reimburse you for business mileage. HMRC allows a flat rate, commonly 45p per mile for the first 10,000 miles per tax year, to cover running costs. But if your business is VAT registered, you can only claim VAT on the fuel portion of that amount – not the whole 45p.

 

This is because the rest of the 45p covers other things like wear and tear, insurance, and maintenance, which are not subject to VAT. HMRC allows you to claim VAT on the fuel element using their advisory fuel rates, which change every quarter depending on fuel prices and engine sizes.

 

Who Can Claim VAT on Mileage?

To claim VAT on mileage, the following must apply:

  • Your business must be VAT registered

     

  • The mileage must relate strictly to business journeys

     

  • You must have valid fuel receipts

     

  • The VAT must be on the fuel costs only, not on the whole reimbursement

     

  • You must keep a detailed log of each mileage claim

     

Whether you’re a sole trader, limited company, or employee, if you use your personal or company car for business miles, you could benefit from VAT on mileage claims.

Example:

If you’re a consultant visiting clients across the UK in your petrol car, your mileage for those trips is claimable — provided it’s for work, and not personal use.

 

Understanding HMRC Advisory Fuel Rates

Advisory fuel rates (AFRs) are published by HMRC every quarter. They tell you how much VAT is built into a typical litre of fuel based on engine size and fuel type (e.g., petrol, diesel, electric). These rates are key when calculating how much VAT to reclaim.

Here’s how they work:

  • You check the AFR that matches your vehicle’s engine and fuel type

     

  • Multiply the business miles by that rate to get the total fuel portion

     

  • Apply the VAT rate (currently 20%) to calculate the reclaimable VAT

     

Example:
 You drive 200 business miles in a petrol car. HMRC’s AFR is 13p per mile.
 200 x 13p = £26 fuel cost
 20% of £26 = £5.20 VAT reclaimable

You only claim VAT on this £5.20 – not the full 45p per mile reimbursement.

 

How to Calculate VAT on Mileage Properly

Follow these steps for each mileage claim:

  1. Track all business journeys, including the date, destination, and purpose

     

  2. Record the total number of business miles driven

     

  3. Multiply the miles by the relevant advisory fuel rate

     

  4. Calculate 20% of that amount (the VAT rate) to get your VAT reclaim

     

  5. Keep fuel receipts for the same period to back up your claim

     

If you’re reimbursing employees, your payroll or accounting system should include mileage templates that make these calculations easier.

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What Records Do You Need to Claim VAT?

Keeping accurate records is essential for VAT on mileage claims. Here’s what HMRC expects:

  • A detailed mileage log for each business journey

  • Vehicle information (fuel type, engine size)

  • Evidence of the journey being business-related (e.g., client visits)

  • Copies of fuel receipts that match or exceed the fuel being claimed

  • Clear calculations showing the use of mileage rates and VAT rate

Failing to maintain these can lead to rejected claims or HMRC penalties. Good record-keeping also helps track fuel efficiency and control mileage expenses.

 

Can You Claim VAT Back on Fuel Without a Receipt?

In most cases, HMRC requires a valid VAT receipt to support your claim. However, there are limited exceptions:

  1. Coin-Operated Machines: You can claim up to £25 in VAT without a receipt if the purchase was made through a coin-operated machine, and you can prove the supplier is VAT-registered.

  2. Business Use Only: VAT can only be reclaimed on fuel used solely for business purposes. If you do not have a receipt, you must still demonstrate that the fuel was used wholly and exclusively for business.

  3. Evidence Alternatives: In rare cases, other documentation such as card statements or logs may support your claim, but these must meet HMRC’s strict standards and may not always be accepted.

To avoid compliance risks, it’s best to keep all VAT receipts when claiming back on fuel.

 

Using Software to Simplify Mileage VAT Claims

Many cloud accounting tools like Xero or QuickBooks let you automate mileage claim tracking and VAT calculations. They can:

  • Record business miles through GPS tracking

  • Auto-fill advisory fuel rates

  • Calculate the correct VAT on the fuel element of mileage

  • Store digital fuel receipts

  • Prepare reports for VAT returns

Using software reduces manual errors and saves time, especially if you or your team make frequent business journeys.

Common Mistakes to Avoid

Even experienced business owners make these common errors:

  • Claiming VAT on the full 45p rate instead of the fuel portion

  • Using old or incorrect advisory fuel rates

  • Forgetting to attach fuel receipts

  • Claiming VAT on personal miles or commuting

  • Not updating logs when switching between petrol cars and company cars

Mistakes can trigger HMRC checks and result in penalties or repayment of VAT. Always double-check your figures and keep evidence.

 

Final Tips to Get It Right

  • Check advisory fuel rates every quarter from HMRC

  • Claim VAT only on the fuel portion of the mileage

  • Don’t guess – use exact business miles

  • Store all mileage expenses and fuel receipts

  • Seek advice if unsure – even accountants sometimes miss these claims

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Understanding how to claim VAT on mileage can reduce your tax bill and help your business stay compliant. Keep good records, follow HMRC guidance, and maximise your VAT recovery the right way.

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