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The HMRC has established a specific mileage rate called Mileage Allowance Payments (MAPs) that employers can pay their employees before any tax benefit arises.
To determine the approved amount for an employee's business travel expenses, multiply the total number of miles driven in a year by the rate per mile for their chosen mode of transportation. Please see the currently approved rates in the table below, extracted from the HMRC website.
|First 10,000 miles
|Above 10,000 miles
|Cars and vans
|45p (40p before 2011 to 2012)
Here are some guidelines to keep in mind:
P11D forms do not need to be submitted if a staff member's remuneration is equal to or below the HMRC-approved MAPs rate.
If an employee is paid less than the set rates per mile, they can claim tax relief on the difference between what they were paid and what they could have been paid.
Anything above these rates is considered a benefit; any excess over these amounts needs to be reported as a benefit.
Any excessive benefit provided to employees must be reported on a P11D form for tax purposes. Furthermore, Class1 NI also needs to be paid on the benefit, which must be done through payroll.
Employees who own a company car are subject to different advisory rates than those without one: Advisory fuel rates.
Companies can incentivise carpooling by offering their employees an additional 5p per mile allowance. This will be tax and NI free, so it's a great way to help the environment while saving money.
For more information on Section E, please visit this website.
Please note – This guideline is not exhaustive, and it does not cover every eventuality. Its main focus is on the most typical scenarios that usually happen in reality. It's important to be aware of other possibilities as well. If you need more detailed information, please refer to the HMRC website. Always consult a tax advisor if you have any doubts or queries.