Milesheet45p or 70 cents: how the UK and US pay for business miles
Two countries, two systems, and a gap that is smaller than the exchange rate makes it look.
Both countries let you deduct the cost of driving for work at a flat rate per mile. The mechanisms differ more than the numbers do.
The headline rates
UK. HMRC's approved mileage allowance payments: 45p a mile for the first 10,000 business miles in the tax year, then 25p. Unchanged since 2011.
US. The IRS publishes a standard mileage rate for business use, revised annually and occasionally mid-year when fuel prices move sharply. It sits in the high-60s to low-70s of cents per mile.
At a rough exchange rate the two are not far apart on the first 10,000 miles. After that, the UK driver drops to 25p and the American does not drop at all.
The structural difference that matters
The UK bands. The US does not.
HMRC's 10,000-mile threshold assumes that beyond a certain point your marginal cost per mile falls. That is true of some costs and not others — fuel scales linearly, and so do tyres and servicing.
The IRS rate applies to every business mile at the same rate, all year. A US driver covering 30,000 business miles is paid the full rate on all of them; a UK driver on the same mileage gets 45p on a third and 25p on the rest, blending to about 32p.
For high-mileage drivers this is the single biggest difference between the two systems.
Who claims, and how
UK. If your employer reimburses at or below the approved rate, the payment is tax-free and there is nothing to declare. Reimbursed below it, you claim Mileage Allowance Relief on the difference via Self Assessment or a P87. Self-employed, you deduct it as simplified expenses.
US. Employees have had a much harder time of it since unreimbursed employee expenses were suspended as an itemised deduction — for most employees, an unreimbursed business mile is simply not deductible. The standard mileage rate mainly benefits the self-employed, and employees whose employers operate an accountable reimbursement plan.
So the UK system is more generous to employees, and the US rate is more generous per mile to the self-employed.
The two systems side by side
| UK (HMRC) | US (IRS) | |
|---|---|---|
| Car rate | 45p, then 25p | Single rate, high-60s to low-70s of cents |
| Banded by annual mileage | Yes, at 10,000 | No |
| Rate changes | Unchanged since 2011 | Revised annually |
| Employees can claim shortfall | Yes — Mileage Allowance Relief | Largely no |
| Self-employed can claim | Yes, simplified expenses | Yes, standard mileage rate |
| Passenger payments | 5p per passenger mile | None |
| Commuting deductible | No | No |
| Contemporaneous record expected | Yes | Yes, explicitly |
At 30,000 business miles
| UK | US | |
|---|---|---|
| First 10,000 | £4,500 | Full rate on every mile |
| Remaining 20,000 | £5,000 | Full rate on every mile |
| Blended rate | 31.7p | Unchanged from the headline rate |
The high-mileage self-employed driver does materially better in the US. The employee reimbursed below the approved rate does materially better in the UK.
Both demand the same evidence
This is where the two systems agree completely.
Both expect a contemporaneous log: date, destination, business purpose and distance. Both treat commuting as non-deductible. Both are sceptical of round numbers and reconstructions.
The IRS is, if anything, more explicit about wanting records made "at or near the time" of the journey. HMRC's expectation is the same in substance.
The practical lesson
Whichever side of the Atlantic you are on, the constraint is not the rate — it is whether you can evidence the miles. A generous rate applied to journeys you never recorded is worth nothing.
Sources
- HMRC — Travel, mileage and fuel rates and allowances
- HMRC — Claim tax relief for your job expenses: vehicles you use for work
- IRS — Standard mileage rates
- IRS — Topic no. 510, Business use of car
General information for UK and US drivers, not tax advice. Rates change: check the current figure in the jurisdiction you are filing in.