2025 Mileage Rates: What You Need to Know

Inland Revenue has released the updated kilometre rates for the 2024–2025 income year. These rates are used to calculate business-related vehicle expenses and apply to both self-employed individuals and employers reimbursing staff for work travel.

The kilometre rates are split into two tiers:

• Tier 1 applies to the first 14,000 kilometres of business travel. It includes both fixed costs (such as depreciation and registration) and running costs (like fuel and maintenance).
• Tier 2 applies to any business travel beyond 14,000 kilometres and covers running costs only.

For the 2024–2025 income year, Inland Revenue has introduced separate Tier 1 rates for different vehicle types, reflecting the varying costs of operating each type. This change ensures the rates more accurately represent actual vehicle expenses.

Here are the current rates:

These rates can be used by businesses to claim deductions for vehicle use or to reimburse employees for work-related travel in their personal vehicles. It’s important to note that while these rates are accepted by the Commissioner as a reasonable estimate of expenditure, businesses may also use other methods—such as actual costs or third-party data—if they provide a more accurate reflection of expenses.

Employers who do not track the specific vehicle types used by employees may use a blended average of the Tier 1 rates to simplify calculations, provided it remains a reasonable estimate.

Why does it matter? Using the correct kilometre rate method helps ensure compliance with tax obligations and provides a fair and consistent approach to claiming or reimbursing vehicle expenses. It also simplifies record-keeping and helps avoid any issues during tax time.

For full details, visit the IRD’s official update: Kilometre Rates 2025 – IRD

Want to know more about how these changes apply to your business? Get in touch with the team at Sidekick for personalised advice.