The 5p a mile almost every claim misses

If you carry a colleague on a business journey, HMRC's approved rates include an extra 5p per passenger per mile. Almost nobody claims it, for two reasons: it is easy not to know about, and it works differently from the main rate.

How it works

The passenger payment is 5p a mile for each fellow employee who is also travelling on business. It is not banded — the 10,000-mile threshold that drops your car rate to 25p does not touch it. Every passenger mile is 5p, all year.

Two colleagues in the car for a 120-mile round trip is £12 on top of the mileage itself. Do that fortnightly and it is over £300 a year that most people never record.

The catch employees need to know

Here is where it differs from the main rate, and why it is worth understanding before you rely on it.

If your employer pays you a passenger payment, up to 5p a mile is tax-free. But if your employer pays you nothing for carrying passengers, you cannot claim tax relief on the difference the way you can with the main mileage rate.

Mileage Allowance Relief covers the gap between what you were paid and the approved rate for the vehicle. It does not extend to passenger payments. If the employer does not pay it, there is nothing to claim.

That makes this one worth raising with your employer rather than saving up for your tax return. Many will pay it once asked, because it costs them little and is tax-free up to 5p.

For the self-employed

Different picture. If you are self-employed and using simplified expenses, the mileage rate you claim is for the vehicle and its running costs — there is no separate passenger element to add, because you are claiming your own costs rather than being reimbursed by an employer.

The conditions

• The passenger must be a fellow employee
• They must also be travelling on business, not being dropped somewhere convenient
• It applies to the same journey, in your own vehicle

A spouse, a client or a friend does not count, however useful the lift was.

Recording it

The evidence is the journey plus who was in the car. Milesheet lets you add passengers to a trip, works out the payment at 5p a mile per head, and shows it alongside the mileage claim — so if your employer does pay it, the number is already there rather than being reconstructed from memory at year end.

The same passenger count also drives the fuel split for personal journeys, which is a different calculation for a different purpose, but the same question: who was actually in the car.

Sources

• HMRC — Travel, mileage and fuel rates and allowances
• HMRC — Business travel mileage for employees' own vehicles
• HMRC — Claim tax relief for your job expenses: vehicles you use for work

General information for UK drivers, not tax advice.