Company car or personal car? A director's mileage guide for 2026/27

If a director uses their own car for qualifying business journeys, HMRC's published approved mileage rates for 2026/27 are 55p for the first 10,000 business miles and 25p thereafter. These own-car rates apply to electric and hybrid cars too. They are not the rates for reimbursing fuel or electricity in a company-provided car. HMRC: 2026/27 mileage rates, HMRC: vehicle types and approved amounts.

Keeping a car personally and claiming mileage may be simpler than providing a company car. It is not automatically cheaper. Compare the company's costs, the director's costs and the tax treatment without mistaking a reimbursement between them for a saving to both.

This guide concerns directors acting as employees of UK limited companies. It is not the sole-trader simplified-expenses method. Rules and published rates were checked on 9 October 2026.

Which mileage rules apply to which car?

An employee's own car uses the approved mileage framework for qualifying journeys. A company-provided car uses separate fuel or electricity reimbursement rules and may create a taxable benefit. Ordinary commuting does not become qualifying business mileage simply because a director owns the company.

Company-car advisory rates have a narrower purpose than own-car mileage allowances. Ordinary commuting remains private travel under the employment travel rules. HMRC: advisory fuel rates, HMRC: business and private travel.

Is the 2026/27 own-car mileage rate 55p or 45p?

The first-band car and van rate increased from 45p to 55p with effect from 6 April 2026. HMRC's policy paper records the retrospective start date; miles above 10,000 retain the 25p rate. HMRC: increasing mileage rates.

The mileage bands run by the individual's tax year, 6 April 2026 to 5 April 2027, not the company's accounting year. Changing cars during the year does not give the employee a new first-10,000-mile band for the same vehicle category. HMRC: approved mileage amounts.

Keep the year beside your spreadsheet rate. A 2025/26 claim and a 2026/27 claim should not automatically use the same first-band amount.

What is the approved mileage amount for 12,000 business miles?

Assume a director uses their own car, completes 12,000 qualifying business miles in 2026/27, and receives exactly the approved amount from the company. All miles belong to the same employment and there are no passenger payments or other adjustments.

This is a hypothetical reimbursement calculation, not a promise that every mile a director drives qualifies. A genuine business reimbursement can form part of the company's expense records, but the director still bears the costs of their personally owned car.

The £6,000 is not automatically £6,000 of "tax saved". It is money paid by the company to the director. Any Corporation Tax effect is a separate calculation dependent on deductibility and the company's tax position. HMRC: company business expenses.

Which journeys can you claim?

Travel must qualify under the employment rules. Ordinary home-to-permanent-workplace commuting is not business mileage, even if you answer work calls or carry a laptop. A client destination or home-office arrangement does not automatically settle the issue: the workplace and journey facts matter. HMRC: private use and business travel.

For each claim, record the date, business purpose, start and end locations, miles travelled and amount reimbursed. Retain supporting appointment or job records where useful. HMRC asks employees to keep records of journeys and amounts received when claiming work-related vehicle relief. HMRC: vehicles used for work.

Do not simply multiply the year's total odometer increase by 55p. That total can include commuting, weekends and other private travel, and the rate changes above 10,000 qualifying miles.

What if the company pays more or less?

The approved amount is a tax benchmark, not an obligation to pay that rate. Where the company pays less, the employee may claim Mileage Allowance Relief on the eligible difference. This gives tax relief, not repayment of the entire missing reimbursement. Payments above the approved Income Tax amount need the appropriate tax reporting. HMRC: employee vehicle tax relief.

For example, if the approved amount is £6,000 but the company pays £5,000, the shortfall is £1,000. If relief is available and the whole difference attracts a 20% tax rate, the tax reduction is £200, not £1,000. This example assumes sufficient taxable income and no other adjustments.

National Insurance has its own calculation. HMRC's 2026 change increases the relevant car-and-van mileage disregard to 55p per mile; it does not use the Income Tax drop to 25p after 10,000 miles. Do not copy the Income Tax bands into a National Insurance calculation for excess payments. HMRC: mileage policy and National Insurance treatment.

Are electric-car mileage rates different?

Not for the approved own-car calculation: an employee's own electric car falls within the same car rates as other cars. That does not mean a company-provided electric car uses those rates; its electricity reimbursement follows a separate framework. HMRC: electric and hybrid employee vehicles.

For a company-provided electric car, the advisory electricity rates published from 1 September 2026 are 7p per mile for home charging and 15p for public charging. HMRC provides rules for reasonable apportionment where charging is mixed. These rates are reviewed quarterly, so check the relevant quarter before paying a claim. HMRC: advisory electricity rates.

The 7p and 15p figures concern electricity in company cars. They do not replace the 55p and 25p rates for a director's own electric car, and they do not authorise an automatic VAT recovery.

Can the company recover VAT on mileage payments?

For reimbursed road fuel, a qualifying VAT claim is based on the supported fuel element and appropriate VAT invoices, not the full mileage payment. Applying a VAT fraction to the whole 55p allowance would wrongly include non-fuel costs. HMRC: road-fuel reimbursement and VAT.

For employee home charging, HMRC's current published position does not allow employer recovery of the charging VAT. Do not use petrol reimbursement rules as a shortcut for a home electricity bill. HMRC: electric-vehicle VAT, section 8.3.

How should a director compare the two options?

Compare like-for-like journeys and the same ownership period. For a personal car, include purchase and expected resale value, finance, insurance and running costs, plus the tax cost of any money extracted from the company to fund it. Then calculate the company's business-mileage reimbursement.

For a company car, include the company's after-tax purchase or rental cost and running costs, plus the director's benefit tax and employer National Insurance. Keep those costs separate before combining them: a lower company bill may be offset by a higher personal bill.

For the electric-company-car side of that comparison, use Taxley's electric car cost guide.

Frequently asked questions

Can I claim 55p for driving the company's leased car?

No. Approved own-car mileage payments are not the company-car fuel reimbursement method. Use the applicable company-car rules and supporting records, and keep fuel or electricity reimbursements separate from the company-car benefit calculation. HMRC: advisory fuel rates.

Can both directors get a first-10,000-mile band?

The approved amount is calculated for each employee's qualifying mileage. Two genuine employees do not share one company-wide allowance; neither can claim the other's journeys as their own. HMRC: employee mileage calculations.

Can ordinary commuting become business mileage because I own the company?

No. Director status does not remove the employment travel conditions. Ordinary commuting to a permanent workplace remains private travel, so owning the company does not justify including those miles in an approved business-mileage claim. HMRC: business and private travel.

Does changing cars restart the first-10,000-mile band?

No. For the same vehicle category, changing cars during the tax year does not restart the employee's approved mileage band. Keep a cumulative record of qualifying miles rather than allocating a separate first band to each car. HMRC: approved mileage amounts.

How do mileage records feed into the company figures?

Reconcile approved claims, payments and any excess or shortfall before finalising the accounts. Then check whether Taxley suits your company's filing. The company tax return is separate from any employee expense claim or payroll reporting needed.

General information, not personalised tax or accounting advice. Rates and conditions checked on 9 October 2026.