Grey fleet explained

Updated September 2026 · 10 min read

Grey fleet means employees driving their own vehicles for work. Your duty of care still applies, so licence, insurance and roadworthiness must be checked — and at 55p a mile, reimbursement adds up faster than most businesses expect.

What counts as grey fleet?

Any vehicle used for a work journey that the business does not own or lease. That includes the obvious cases — an engineer using their own car to visit a site, a manager driving to a supplier, a director using a personal vehicle for company business — and several that get overlooked: a vehicle belonging to the employee's partner, a car bought with a cash allowance instead of a company vehicle, and a van an employee owns and uses for the firm's work. Ordinary commuting is not a work journey for these purposes; travel to a temporary workplace or between sites is. The reason the definition matters is that none of the visibility you have over a company vehicle exists here. You do not know the vehicle's age, its MOT status, its tyre condition, its emissions class or whether its insurance covers business use — and yet, as an employer, you carry duties in respect of the journey.

Does duty of care really apply to someone else’s car?

Yes, and this is the part that surprises employers most. Under the Health and Safety at Work etc. Act 1974 the duty runs to the health and safety of employees at work, so far as is reasonably practicable (section 2), and to others affected by the way the business operates (section 3). The Management of Health and Safety at Work Regulations 1999, regulation 3 require a suitable and sufficient risk assessment of that work. The joint HSE and Department for Transport guidance Driving at work: managing work-related road safety (INDG382) is explicit that it applies to employees using their own vehicle for a work-related journey, not only to company vehicles, and frames the assessment as driver, vehicle and journey. The ownership of the vehicle simply does not change the duty. What changes is how much harder it is to discharge, because everything you would know about a company van has to be actively obtained instead.

What do you actually have to check?

Five things, on a stated frequency, with a record of when you last did each. Driving licence and entitlement — the employee generates a check code at the GOV.UK view or share your driving licence information service and gives it to you with the last eight characters of their licence number; the code is valid for 21 days and shows entitlement, endorsements and any disqualification. Insurance including business use, evidenced by the certificate or schedule rather than a verbal assurance. A valid MOT, checkable free from the registration on GOV.UK. Vehicle tax and general roadworthiness, including tyres. And fitness to drive, including eyesight and any condition notifiable to the DVLA. Set the frequency deliberately — many employers check licences twice a year and more often for drivers with endorsements — and keep the records, because an undocumented check is, for practical purposes, a check that did not happen.

What is the insurance problem with grey fleet?

A standard private motor policy covers social, domestic and pleasure use, and usually commuting to a single permanent workplace. It does not cover driving to a customer, between sites or to a temporary workplace unless business use has been added, and it certainly does not cover carrying goods for payment. Employees frequently assume otherwise, in good faith, because the distinction is invisible until a claim. Three practical steps. Ask for evidence, not assurance — a schedule showing the class of use, refreshed annually. Tell employees that business use is normally an inexpensive addition, so the conversation is about administration rather than cost. And ask your own broker about non-owned vehicle or contingent liability cover, which responds where an employee's own policy fails while they were driving on your business. Without it, an employee's inadequate cover becomes the business's exposure, which is precisely the wrong way round.

What can you pay, and what is taxable?

Approved mileage allowance payments changed in 2026, for the first time in fifteen years. From the 2026 to 2027 tax year the approved rates for cars and vans are 55p per mile for the first 10,000 business miles in the year and 25p per mile above that; motorcycles are 24p and bicycles 20p (gov.uk, Travel — mileage and fuel rates and allowances, updated 21 May 2026). The previous 45p rate had been unchanged since 2011. Two rules follow. Pay at or below the approved rate and the payment is free of income tax and National Insurance and needs no reporting; where you pay less, the employee can claim mileage allowance relief on the difference. Pay more and the excess is taxable earnings. One recovery worth knowing: a VAT-registered employer can reclaim the VAT on the fuel element of mileage paid to employees, calculated using HMRC's advisory fuel rates, provided it holds VAT receipts for the fuel (HMRC VAT Input Tax manual, VIT55400).

When does a company van cost less than paying mileage?

Sooner than most businesses assume, once the arithmetic is done. Take an employee driving 12,000 business miles a year in their own vehicle. At the approved rates that is 10,000 miles at 55p and 2,000 at 25p — £5,500 plus £500, so £6,000 a year, or £500 a month, paid out of taxed profit with no VAT to recover except on the fuel element. At 20,000 business miles it is £8,000 a year. These are arithmetic illustrations of the approved rates, not a quote and not a comparison to any particular vehicle. Set them against a business contract hire rental quoted ex-VAT, where a VAT-registered business normally recovers the VAT on a van in full, the whole rental is deductible, vehicle excise duty is included and maintenance can be a fixed itemised element. The honest way to decide is to take your real business mileage per driver and ask us for a written quote to put next to it — not to compare a monthly rental against a mileage rate in your head.

What are the hidden costs of running on grey fleet?

The reimbursement is the visible number; these are the ones that do not appear on any invoice. No control over emissions — an employee's older diesel can be liable for a daily charge in a Clean Air Zone or the ULEZ, and someone pays it or the job does not get done (see ULEZ and Clean Air Zone rules for vans). No livery, no racking, no load security, so the vehicle is neither a working tool nor an advertisement. No visibility of condition between checks. Availability risk: an employee's car in the garage is your job that does not get attended. Administration, in claim forms, checking and disputes about routes. And a reputational point that matters to some customers — a business arriving in unbranded, unchecked private cars presents differently from one arriving in a liveried, maintained vehicle. None of that argues for abolishing grey fleet. It argues for knowing what it is really costing.

How do you reduce grey fleet without banning it?

Start by measuring it: pull last year's mileage claims by person and rank them. The picture is usually a small number of heavy users and a long tail of occasional ones, and those two groups need different answers. For the heavy users — anyone consistently over roughly 10,000 business miles — a dedicated vehicle usually wins on cost, control and presentation. For the long tail, keep grey fleet but manage it properly: a written policy, a licence and insurance check cycle, and a rule that nobody drives on company business until both are on file. A pool vehicle covers the middle ground and removes the private-use complication if it is genuinely kept at the premises and not allocated to an individual. Where you do move to company vehicles, note the structure: business contract hire is taken by the limited company or LLP, not by the employee, on terms of 24 to 60 months — the company holds the agreement and provides the vehicle to its staff.

This is general information, not tax or legal advice

The above is general information about UK grey fleet obligations and mileage rates, sourced to GOV.UK, HMRC guidance and HSE publications and dated. It is not tax, legal or health and safety advice, and it cannot account for your circumstances. Mileage rates and thresholds change — the approved rates above changed in 2026 after fifteen years — and your position also depends on your VAT status, your employment contracts and the actual pattern of business travel. Confirm the tax treatment with your accountant, and take proper advice on your health and safety duties if driving is a significant part of what your people do. What we can do is quote a suitable vehicle against your real business mileage, in writing, ex-VAT with the inclusive figure alongside, so you have a genuine number to compare with what you are paying out in mileage today. Ask us for that quote.

FAQs

What is a grey fleet?

Vehicles used for work journeys that the business does not own or lease — typically employees’ own cars and vans, and vehicles bought with a cash allowance. Ordinary commuting is not a work journey, but travel to a temporary workplace, to customers or between sites is.

Is an employer responsible for an employee’s own car used for work?

For the work journey, yes. The Health and Safety at Work etc. Act 1974 duties apply regardless of who owns the vehicle, and the joint HSE and DfT guidance INDG382 expressly covers employees using their own vehicle for a work-related journey. You must assess driver, vehicle and journey.

What is the HMRC mileage rate for 2026/27?

55p per mile for the first 10,000 business miles in the tax year and 25p per mile above that, for cars and vans; 24p for motorcycles and 20p for bicycles (gov.uk, updated 21 May 2026). This was the first change to the car and van rate since 2011, when it was set at 45p.

Do employees need business use on their insurance?

Yes, for any work journey beyond ordinary commuting. A standard private policy covers social, domestic and pleasure use and usually commuting only. Ask for the schedule showing the class of use rather than accepting a verbal assurance, and refresh the evidence annually.

How do I check an employee’s driving licence?

The employee generates a check code at the GOV.UK view or share your driving licence information service and gives it to you with the last eight characters of their licence number. The code lasts 21 days and shows entitlement, endorsements and disqualifications. Record the date you checked.

Can I reclaim VAT on mileage paid to employees?

A VAT-registered business can reclaim the VAT on the fuel element of a mileage payment, calculated using HMRC’s advisory fuel rates, provided it holds VAT receipts for the fuel bought by the employee (HMRC VAT Input Tax manual, VIT55400). The rest of the payment carries no recoverable VAT.

At what mileage does a company vehicle beat paying mileage?

It depends on the vehicle and your VAT position, but the reimbursement side is easy to calculate: 12,000 business miles costs £6,000 a year at the approved rates and 20,000 costs £8,000. Put your real per-driver mileage next to a written quote rather than comparing figures in your head.

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