Business Mileage and Travel Expenses for Small Teams

The two categories of travel expense

It helps to think of travel expenses as two genuinely different things, because they're reimbursed differently and carry different tax treatment. The first is mileage: an employee using their own car, van, motorcycle or bicycle for business journeys, reimbursed on a pence-per-mile basis rather than against a specific receipt. The second is everything else — train fares, flights, taxis, hotels, parking and tolls — reimbursed against the actual amount spent, evidenced by a receipt or ticket.

Conflating the two in a policy tends to cause confusion, because people start asking whether they should log mileage for a taxi journey, or claim a flat rate for a train fare. Keep the two sections of your policy clearly separate and employees are far less likely to get the mechanics wrong.

How mileage reimbursement actually works

HMRC operates an approved mileage allowance payment system that sets a maximum pence-per-mile figure businesses can pay employees tax-free for business mileage in their own vehicle, with a different, usually lower, rate that applies after a set annual mileage threshold. Paying at or below the approved rate means no tax or National Insurance liability arises on the payment; paying above it turns the excess into a taxable benefit that needs to be reported.

The specific pence-per-mile figures and the mileage threshold at which the lower rate kicks in are reviewed by HMRC from time to time, so rather than quoting a number in your written policy, reference 'the current HMRC-approved mileage rate' and check the up-to-date figure on GOV.UK whenever you calculate a payment. This keeps your policy accurate without needing to be rewritten every time the rate changes.

Passenger payments — an additional amount for carrying a fellow employee on the same business journey — and separate rates for motorcycles and bicycles also exist under the same system, each with their own current rate. If your team regularly car-shares for work travel or cycles to client sites, it's worth checking these specific rates rather than assuming the standard car rate applies.

What counts as business mileage — and what doesn't

The most common area of confusion is ordinary commuting. Travel from home to a normal, permanent workplace is not business mileage, even if the employee happens to be doing work-related things on the way, such as making calls. What counts is travel to a temporary workplace, a client site, a supplier meeting, or between two different work locations in the same day.

Employees who work from home some or all of the time and travel occasionally to an office or client site raise a genuinely more complex question about what their 'normal' workplace is for these purposes. If this applies to your team, it's worth checking current HMRC guidance on travel and subsistence for homeworkers specifically, rather than assuming the general commuting rule applies unchanged.

Keeping a usable mileage log

A mileage log doesn't need to be elaborate, but it does need four pieces of information for every journey: the date, the journey (from and to), the business purpose, and the number of miles. A simple shared spreadsheet or a field within your expenses tool is enough for most small teams — the key is consistency, not sophistication.

Ask employees to log mileage as they go rather than reconstructing it from memory at month end. A journey logged the same day is far more likely to be accurate, and an accurate log is what protects both you and the employee if HMRC ever asks questions about how a mileage payment was calculated.

• Date of the journey
• From and to locations
• Business purpose in a short phrase
• Miles travelled, ideally from a mapping tool rather than an estimate

Booking other travel: trains, flights and hotels

For travel bought against a receipt rather than claimed as mileage, decide early whether bookings happen centrally, through a company card, or individually with reimbursement afterwards. Central booking, even informally through one person checking availability and cost, tends to control spend better than leaving every employee to book independently, particularly for anything booked with much notice where prices vary significantly by date.

Set a simple standard for what's reasonable — standard class rail rather than first class, a stated hotel budget per night, economy flights for most trips — and be explicit about who can authorise an exception, such as a client specifically requesting a particular arrangement. Vague guidance like 'use good judgement' tends to produce inconsistent claims that are awkward to challenge after the fact.

Subsistence while travelling

Meal costs incurred while travelling for business — commonly called subsistence — are generally reimbursable, but the tax treatment depends on whether you reimburse actual receipted costs or use a scale-rate allowance. Scale rates have their own conditions and current published figures, and using them incorrectly can create an unexpected tax position, so check current HMRC guidance on this specifically, or take advice from your accountant, before adopting a flat allowance rather than receipted reimbursement.

Whichever approach you take, apply it consistently across the team rather than negotiating it case by case, since inconsistent subsistence treatment is one of the more common sources of a sense of unfairness among staff who travel at different frequencies.

International travel and insurance

If your team travels internationally for business, check that your business travel insurance actually covers the destinations and activities involved, and confirm this before the trip rather than assuming standard cover applies. Currency, foreign transaction fees on cards, and different expense norms in other countries are all worth addressing in your policy if international travel happens more than rarely.

Some businesses set a slightly more generous subsistence allowance for international travel to reflect genuinely different costs abroad — reasonable, provided it's stated in the policy and applied consistently rather than decided trip by trip.