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It is common practice for employees to be reimbursed a reasonable rate per mile for using their own car whilst on company business.

HMRC issue a system of Approved Mileage Allowance Payments (AMAP) which applies to employees using their own vehicle for business journeys.

These rates are as follows;

  • Cars and Vans (first 10,000 miles pa) – 45p per mile
  • Cars and Vans (additional mileage above 10,000) – 25p per mile
  • Motorbikes – 24p per mile
  • Bicycles – 20p per mile

Whilst HMRC issue the above rates, it is still up to the employer to decide their own reimbursement rates.

If the employer pays more than the AMAP rates, then a benefit in kind has occurred and the benefit needs to be declared on an annual P11D form.

If the employer pays less than the AMAP rates, then the employee is entitled to claim tax relief for the shortfall (Mileage allowance relief).  This relief is also applicable to employees who are paid a company car cash allowance.

This tax relief is the difference between the AMAP rate and the company rate, multiplied by the number of miles claimed. For a higher rate tax payer who completes a large number of business miles, this recovery can often generate a significant tax reduction.

EG – An employee who completes 15,000 business miles and who is paid 14p per mile from his employer will collect;

15,000 miles at 14p per mile =   £2,100

However, HMRC allow this tax relief to be calculated at AMAP rates ;

10,000 miles at 45p per mile = £4,500, plus
5,000 miles at 25p per mile = £1,250 = £5,750

Therefore, an additional tax relief on £3,650 (£5,750 minus £2,100) can be claimed on your annual tax return.

For a higher rate tax payer, this results in a saving of £1,460

Bookkeeper HarlowTransform AccountingBookkeeper Essex

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