Update:
From 1 September 2021
Company car mileage allowance is a benefit given to employees by the employers in the UK to help them support financially while they on business trips. All employers in the UK have some kinds of taxes, National Insurance and reporting compulsion if they provide fuel or travelling benefits to employees using their own vehicle for business trips.
There are 2 separate schemes are used to deal with these mileage expenses - one for tax and one for National Insurance. Here we will discuss about the
In the UK, if employers have to make payments to employees that are more than a particular amount then it has to be reported to HM Revenue and Customs (HMRC) and get the excess deducted and pay tax on the remaining.
When employers pay their employees for using their personal vehicles for business purposes or business trips, it is called Mileage Allowance Payments (MAPs). In the UK, employers are allowed to pay a particular amount of Mileage Allowance every financial year without need for reporting them to HMRC, known as ‘approved amount’.
Best is to use HMRC’s Mileage Allowance Payments worksheet to find out the exact amount. For better understand we are helping you know how it is calculated. Employee’s business travel miles have to be multiplied by the rate per mile for their vehicle to find out the ‘approved amount’.
A statutory system of Approved Mileage Allowance Payments (AMAPs) applies for employees who use their own vehicles for business or official trips.
Below Table is for your reference showing tax rates per business mile
Let’s say, company’s employees travels 12,000 business miles in their car - the approved amount for each employee for the financial year would be £5,000 (10,000 x 45p plus 2,000 x 25p). Irrespective of which vehicle your employees use the calculation is done together.
Any amount that is above the ‘approved amount’ should be reported to the concerned authority.
You must:
Below ‘approved amount’
Any amount that is below the ‘approved amount’ need not be reported to concerned authority. Employers will not have to report to HMRC or pay tax, but:
In the UK, getting reimbursed at a reasonable mileage rate is very much normal for employees who used their own vehicle for business travel purposes.
Following you can find the position of the income tax and national insurance contributions (NICs):
Payments by the employers are not needed to be reported on a P11D except for when the employee is reimbursed at a rate that is higher than the Approved Mileage Allowance Payments (AMAP). It is very much possible that employee will claim for income tax relief for the shortfall, if the employer pays less that the normal rates.
When business trip payments are made for the carriage of fellow employees who are also on the same business trip then rates of up to 5p per mile, per passenger, are relived of NICs and taxes. This also covers those volunteers who take their vehicles for hospital car services etc, even if they are not from the same organisation or even employees.
You should also be aware of the company car tax banding. It will help you understand the set of rules about what company tax banding it will fall in, if you happen to choose your next company car. This will also determine what level of company car tax you will have to pay. Often called as BIK in short, it is known as benefit-in-kind. The car tax table can help you determine your taxes.
Even the pure electric propulsion cars with zero emissions are not exempted from the table. CO2 emission is on the left hand side of the columns in the company car tax table enclosed below. The tables start at 0g/km CO2 emissions as it shows in 2017-18 it is 9%.
Then you read across to check the benefit in kind percentage of tax that will be applied to the P11D value of the company car that your choose for each financial year.
The Advisory Fuel Rates (AFR) from 1st September 2018 are below:
*Hybrid cars are evaluated under petrol or diesel in such conditions.
The Advisory Fuel Rates (AFR) of company car mileage are used as a parameter for to calculate the reimbursement amounts.
The Advisory Fuel Rates (AFR) are guidelines that are determined by the Government. However, the company car mileage rates are adopted by the companies depending on their own business conditions. Although, usually, the companies follow the guidelines set by the Government to make sure the cost beared by the employees for fuel are covered and reimbursements made on the basis of that are reasonable. The rates set by HMRC are based on the existing fuel costs (fuel and oil prices). It also changes depending on global fuel pricing. Additionally factors like applied MPG (miles per gallon) which can cover dissimilar road condition, factors that are based on the change of the season and the efficiency of the vehicles. These factors are becoming a more relevant due to advancement in vehicle and related technology. The Advisory Fuel Rates are amended on a quarterly basis that is in the months of March, June, September and December, that too depends on the factors mentioned above.
Multiple options are available, when a mileage claim policy for company cars is implementing.
Below you can find the company car tax tables:
Company car tax tables
Below you can find the changes in company car tax that you should be aware about
Check the following company car tax table, which is based on engine size:
Any questions? Schedule a call with one of our experts.
Sumit Agarwal Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.
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