Excess Mileage Payments

Petrol and diesel pump prices are high but the tax-free mileage rates payable to employees who use their own vehicles for business have not been adjusted for over a decade.

Many employees cannot afford to use their own car or motorbike for business journeys if they only get reimbursed at these rates (see table) so some employers choose to pay more. But any excess above the tax-free rate is taxable and subject to NIC.

The guidance from HMRC is confusing but the simplest way to deal with the excess mileage payments is to treat them as extra salary and put them through the payroll. This treatment should be communicated to the affected employees.

Where the employee’s car is purely electric the employer can still pay up to the rates in the table tax and NIC-free. Where the employee charges their private electric car at a charging point at work for free there is no taxable benefit on the electricity.

VehicleFirst 10,000 miles per yearAbove 10,000 miles per year
Cars and vans45p25p
Motorcycles24p24p

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