If your employee has to travel for business you can pay for or reimburse their travel expenses without the payment being subject to tax or NIC. However you must declare all expenses paid on behalf of an employee or reimbursed to them on a P11d. if you give your employee a round sum amount for travel costs this will be taxable.
Business mileage at the rate of 45p per mile up to 10,000 miles in the current financial year (2013-14) and 25p per mile thereafter is not taxable and does not need to be declared on a P11D. You do not have to pay at this rate. If you pay at a lower rate your employee can reclaim the difference against their tax but if you pay at a higher rate than this the difference is taxable. Find more about tax relief on mileage.
Business mileage or other travel costs does not include travel to and from your place of work. A business mileage record must be kept in order to support the claim detailing the reason for the journey as well as the date and mileage. A diary should also be kept as part of your financial records to support the mileage claims.