HMRC Mileage Rates

26th May 2011

Business travel in employees’ own vehicle

 
From 6 April 2011, the approved rates for income tax purposes per business mile are as follows:
 
Type of vehicle
First 10,000 miles
Above 10,000 miles
Cars and vans
45p
25p
Motorcycles
24p
24p
Cycles
20p
20p
 
If the mileage allowance payment that you pay to an employee is in line with the approved rate, no tax will be payable and the payments do not need to be reported to HMRC.
 
If the mileage allowance payment that you pay to an employee exceeds the approved rate, and the employee is a director or has earnings over £8,500, the excess will need to be included on a form P11D. No tax will be payable by the employer but individual will be liable to tax.
 
If the mileage allowance payment that you pay an employee is below the approved rate, the employer will have no tax to pay and will not be required to report them to HMRC. The employee will be able to claim tax relief on the unused balance of the approved amount.
 
Note that if an employee carries any other employees in their own car or van on business travel, employers can pay them passenger payments of up to 5p per passenger per business mile, without having to report them to HMRC or pay any income tax on them. Note that if no passenger payments are made or if the amounts are below the full amount allowable, employees are not entitled to any tax relief.
 
Business travel in company vehicle
 
From 1 March 2011, the advisory rates for income tax purposes per business mile are as follows:
 
Engine size
Petrol
Diesel
LPG
1400cc or less
14p
13p
10p
1401cc to 2000cc
16p
13p
12p
Over 2000cc
23p
16p
17p
 
Note that petrol hybrid cars are treated as petrol cars for this purpose.
 

For one month from the date of change, employers could use either the previous or new current rates, as they choose.

Author: Emma Glover (emma.glover@rowlandsaccountants.co.uk)

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