Tax free mileage rates for business travel

  • by Carole Jordan
  • 25 Apr, 2016
Business man using own vehicle for business travel

If your employees use a company car for business travel, or use their own car, then they can claim tax free expenses for their mileage.  Here’s some tools and information to guide you through.

Petrol for business travel in a company car

From March 1st 2016 new advisory fuel rates have been released for employees using a company car. The amount they are entitled to is calculated per mile, dependent on the engine size of the company car.

Engine size Petrol - amount per mile LPG - amount per mile
1400cc or less 10 pence 7 pence
1401cc to 2000cc 12 pence 8 pence
Over 2000cc 19 pence 13 pence

Mileage allowances for use of own vehicle

If your employee uses their own vehicle for business travel then different rates apply . If the amount you pay your employees is above an ‘approved amount’ then you must report these payments to HMRC.

In order to work out the ‘approved amount’ simply multiply your employee’s business travel miles for the year by the rate per mile for their vehicle. If your employee has done over 10,000 miles in their own car or van then anything above 10,000 miles needs to be calculated separately at a reduced rate.

Type of vehicle First 10,000 miles Above 10,000 miles
Cars and vans 45p (40p before 2011 to 2012) 25p
Motorcycles 24p 24p
Bikes 20p 20p

If you need help with this then HMRC have a MAPs working sheet designed to assist you with this process.

How to report mileage to HMRC

Anything above the ‘approved amount’ should be added to your employees pay, so tax can be paid as normal. This mileage should then be reported to HMRC in one of 2 ways, depending on salary “at a rate.” See information on how to calculate salary “at a rate.”

Who? What to do? What to pay?
Employees at a rate of less than £8,500 a year Report on form P9D Add anything above the 'approved amount' to the employee's pay,
and deduct and pay tax as normal
Employees at a rate of £8,500 or more a year Report on form P11D Add anything above the 'approved amount' to the employee's pay,
and deduct and pay tax as normal
Directors Report on form P11D Add anything above the 'approved amount' to directors' pay,
and deduct and pay tax as normal

If you reimburse your employees at the rate less than allowed by HMRC, your employee can claim Mileage Allowance Relief (MAR) for the shortfall. This relief will reduce their taxable pay.

Remember P11D and P9D submissions are due in July! If you need more information or help with this issue please call an advisor on 01273 882200.

All details above were correct at the time of publishing - for more up to date information please get in touch .

You might also be interested in...

If you enjoyed the blog, why not leave us a comment, or share it with a friend...

Free advice delivered to your inbox

Browse our other blog posts...

Our latest blog

by Carole Jordan 12 Oct, 2017

This is the first in our series of blogs designed to help you better understand your business accounts. We’re kicking things off with the profit & loss report!

by Carole Jordan 09 Oct, 2017

Taking on your first employee can be an exciting time but there are some responsibilities you need to be aware of. One of them is compulsory pensions these are your auto-enrolment responsibilities. Find out what this means below.

by Carole Jordan 02 Oct, 2017

This is the second most popular question from business owners. This sounds like a simple question but the answer is complex and involves many aspects to consider. The answers will depend on the make of the car, the tax position of the owner, their business and the method of ownership.

by Carole Jordan 25 Sep, 2017

Dealing with overseas customers and VAT rules can be a bit complicated for some businesses, particularly those in retail where you may not have proof that goods are leaving the UK.
Read below to find out more about the options available to your business.

by Carole Jordan 18 Sep, 2017

If you receive rental income from a furnished residential letting then you’ll be aware of a “Wear and Tear” allowance, eligible for use against your properties. This allowance recently saw a change to its terms, read below for more details.

More posts
Share by: