When you run a limited company, using a car for work can quickly get confusing. Should you log mileage and claim it back — or have the company pay for fuel? And what about tax?
Let’s break down the limited company car mileage vs fuel benefit debate, straight from HMRC’s official rules, so you can choose what’s best for your business.
Option 1: Using your own car and claiming mileage
If you use your own personal car for business journeys, your limited company can reimburse you for those miles — and, when done correctly, it’s completely tax-free.
HMRC allows limited companies to pay Mileage Allowance Payments (MAPs) for business travel in an employee’s or director’s own car.
The current approved rates are:
- 45p per mile for the first 10,000 business miles in a tax year
- 25p per mile for anything over 10,000 miles
👉 HMRC source: Business travel mileage for employees’ own vehicles
As long as the company sticks to these rates, there’s no tax or National Insurance to pay — and you don’t need to report anything to HMRC.
If you pay less, the director or employee can claim the difference as Mileage Allowance Relief (MAR).
If you pay more, the extra becomes taxable & reportable via a P11D.
Just make sure to keep a full mileage log — including dates, start and end locations, mileage, and the business purpose of each trip. HMRC will want proof if they ever ask! We also have a handy downloadable Excel mileage tracker on our Resources page (scroll to the bottom — it’s free to grab)
Option 2: Company car and fuel repayments
If the company provides or leases a car for you, the tax rules change completely.
When a company car is made available for private use (including commuting), it counts as a Benefit in Kind (BiK) — and both the company and the employee/director pay tax on it.
The amount depends on the car’s list price and CO₂ emissions.
👉 HMRC source: Tax on company cars
If the company also pays for fuel that’s used privately, there’s an extra charge called the Car Fuel Benefit.
To avoid this, you’ll need to repay the cost of all private fuel to the company — otherwise, it becomes another taxable benefit.
HMRC publishes Advisory Fuel Rates (AFRs) every quarter, which show the amounts you can use to:
- Reimburse business mileage in a company car, or
- Calculate how much an employee should repay for private fuel
👉 HMRC source: Advisory fuel rates
The company must report car and fuel benefits through a P11D or via payroll and pay Class 1A National Insurance on the value of the benefit.
Mileage logs vs fuel benefit — which is better?
This is where it gets interesting for a limited company. The limited company car mileage vs fuel benefit decision depends on how you use your vehicle and how much admin you’re willing to manage.
| Option | Pros | Cons |
| Using your own car (mileage method) | Simple, tax-free at HMRC rates, less admin | No company car perks, must track mileage carefully |
| Company car (with/without fuel) | Business covers lease, maintenance, insurance | Creates a taxable benefit; extra fuel charges unless repaid |
For most small limited companies, the mileage method is usually simpler and more tax-efficient — especially when the car is mostly used personally or has high emissions.
However, if you regularly travel long distances for business or use a low-emission company car, the company car route might make sense. Just make sure all the HMRC reporting and fuel repayments are done correctly.
Repairs, maintenance, and insurance — who pays what?
Whether you’re claiming mileage or using a company car, it’s important to know who’s responsible for repairs and running costs — and what’s claimable.
If you use your own car (mileage method)
When you use your own personal vehicle and claim mileage at HMRC’s approved rates, that allowance already covers everything — fuel, servicing, repairs, insurance, vehicle tax, and even wear and tear.
You can’t claim repairs or maintenance separately, even if you had to replace tyres or pay for an MOT. Those costs are considered included in the mileage rate.
If your car needs work for private reasons (like a clutch replacement or body repair), it’s still your personal cost — not the company’s.
If it’s a company car
If the car belongs to your limited company, the company is responsible for everything: repairs, maintenance, insurance, MOT, and servicing.
These are allowable business expenses — they reduce the company’s profit and, in turn, its corporation tax bill.
The only time this becomes an issue is if the company pays for repairs on a privately owned car — that would be treated as a taxable benefit in kind for the employee or director.
| Car Type | Who pays for repairs? | Tax treatment |
| Own car (mileage claim) | You personally | Covered by mileage allowance – no extra claim allowed |
| Company car | The limited company | Allowable business expense (reduces corporation tax) |
| Company pays for repairs on a personal car | The company | Taxable benefit to the director/employee |
Record-keeping tips from DNA Accountants
HMRC loves good records (and so do we!). Whether you’re claiming mileage or running a company car, here’s what to keep:
- Mileage logs showing date, journey details, and business purpose
- Evidence of any fuel repayments made for private use
- Copies of advisory fuel rates used in calculations
- Records of car purchase or lease, insurance, and servicing
- CO₂ emissions data for company cars
And remember: commuting doesn’t count as business mileage — even if you’re driving to your own limited company’s office!
Tip: Use mileage-tracking apps like MileIQ
Manually logging every trip can be a pain — especially if you’re always on the move. Apps like MileIQ, Driversnote, or Tripcatcher automatically track your journeys, calculate mileage, and export HMRC-compliant reports.
They’re a brilliant time-saver for directors who drive often, and they make it easy to prove your mileage if HMRC ever comes knocking. Just double-check your app’s reports each month and file them with your company records.
Our advice
There’s no one-size-fits-all answer. The key is to choose the setup that gives your company flexibility, keeps your taxes efficient, and avoids unwanted HMRC surprises.
If you’re unsure, speak to your accountant (or give us a shout at DNA Accountants!) — we can help you work out whether a mileage log or company car policy is best for your situation.