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Mileage Rates For Company Cars in 2024

mileage rates for company cars

In the UK, company cars and mileage reimbursement policies are common employee benefits and can prove to be an important means of conducting business. Understanding business mileage rates for company cars is vital for both employers and employees. While it may seem like a lot to wrap your head around, following procedure and logging detailed employee milage records can help you to stay on top of your company’s milage payouts.

In this article, we will take a look at what mileage rates are, how they work, how they are calculated and the most effective ways to keep track of them.

What Are Mileage Rates?

Mileage rates are the amounts that employers pay to their employees for using their own vehicles for work purposes. These rates are designed to cover the cost of fuel, wear and tear, and other associated expenses that an employee may incur while using their vehicle for work purposes.

The mileage rates that employers pay can vary depending on a number of factors, including the type of vehicle being used, the distance traveled, and the purpose of the journey. In general, the rates paid for business journeys are higher than those paid for private journeys, and rates for company cars are generally higher than those paid for personal vehicles.

How Do Mileage Rates Work?

Mileage rates work on a per-mile basis. This means that the employer pays the employee a set amount of money for every mile they travel for work purposes. For example, an employer might pay their employees 45p per mile for the first 10,000 miles they travel in a year, and then 25p per mile for any additional miles traveled.

Mileage rates are designed to cover the costs associated with using a personal vehicle for work purposes, such as fuel costs, wear and tear, and maintenance. They are also designed to provide an incentive for employees to use their own vehicles for work purposes, rather than relying on a company car or other mode of transportation.

How Are Mileage Rates Calculated?

Mileage rates are calculated using a number of different factors. The main factors that are taken into account when calculating mileage rates include the following:

  1. The type of vehicle being used – different types of vehicles have different fuel consumption rates and maintenance costs, and this can impact the mileage rate that is paid.
  2. The distance travelled – the further an employee travels for work purposes, the higher the mileage rate that is paid.
  3. The tax status of the employee – mileage rates are also impacted by the tax status of the employee. Employees who are subject to higher tax rates may receive a higher mileage rate to offset the additional tax costs they incur.
  4. The cost of fuel – mileage rates are also impacted by the cost of fuel. If fuel prices are high, employers may increase the mileage rate to cover the additional costs.

In general, mileage rates are designed to be fair and reasonable and are designed to cover the costs associated with using a personal vehicle for work purposes.

mileage rates

Latest HMRC Mileage Allowance Payments

The latest HMRC mileage rates can be found here. Employers should use advisory fuel rates to work out mileage costs if they provide company cars to their employees.

These rates apply from 1 September 2022.

  • Engine 1400cc or less – 15 pence per mile (petrol) and 9 pence per mile (LPG)
  • Engline 1401cc to 2000cc – 18 pence per mile (petrol) and 11 pence per mile (LPG)
  • Engine over 2000cc – 27 pence per mile (petrol) and 17 pence per mile (LPG)
  • Engine 1600cc or less – 14 pence per mile (diesel)
  • Engine 1601cc to 2000cc – 17 pence per mile (diesel)
  • Engine over 2000cc – 22 pence per mile (diesel)

If an employee is using their own car for a business trip, you can reimburse them with an approved allowance without needing to report it to HMRC. To do this, you must multiply the amount of yearly miles by the rate per mile for their vehicle.

  • Car – For tax purposes: 45 pence for the first 10,000 business miles in a tax year, then 25 pence for each subsequent mile. For National Insurance purposes: 45 pence for all business miles
  • Motorcycle – 24 pence for both tax and National Insurance purposes and for all business miles
  • Cycle – 20 pence for both tax and National Insurance purposes and for all business miles

How Are Mileage Rates Taxed?

The tax treatment of mileage rates can vary depending on a number of factors, including the purpose of the journey and the tax status of the employee.

In general, mileage rates are subject to income tax and National Insurance contributions (NICs) if they exceed the Approved Mileage Allowance Payments (AMAPs) set by HMRC. AMAPs are the maximum rates that can be paid tax-free to employees for business mileage in their own vehicles.

The current AMAP rates in the UK are:

  • 45p per mile for the first 10,000 business miles in a tax year
  • 25p per mile for any additional business miles in a tax year

If the mileage rate paid to an employee is higher than the AMAP rate, the excess is subject to income tax and NICs. Employers are required to report any mileage payments made to employees on their P11D forms at the end of the tax year.

However, if an employer pays a mileage rate that is below the AMAP rate, the employee can claim tax relief on the difference between the two rates. This can be done either by completing a self-assessment tax return or by contacting HMRC directly.

If an employer provides a company car to an employee, the employee is generally subject to a tax charge based on the car’s list price and CO2 emissions. However, if the employee uses the company car for business purposes and receives a mileage rate, they may be able to claim tax relief on the expenses incurred for those journeys.

What Constitutes a Business Trip?

In the context of mileage rates for company cars in the UK, a business trip is generally defined as a journey made by an employee for work-related purposes. The purpose of the journey is an important factor in determining whether the journey can be classified as a business trip.

Here are some examples of what might be considered a business trip:

  • Travelling to a meeting with a client or supplier
  • Attending a training course or conference
  • Delivering goods or services to a customer
  • Visiting a different office or work site for work-related purposes

Commuting to and from work, short journeys or journeys that don’t involve work would not be considered business trips for the purposes of mileage rates.

It’s also worth noting that the rules around what constitutes a business trip can vary depending on the specific circumstances of the journey. For example, if an employee makes a detour on the way to a business meeting for personal reasons, such as stopping for lunch or running an errand, only the portion of the journey that was for work-related purposes would be considered a business trip.

In general, it is the responsibility of the employer to determine whether a journey is a business trip or not and to ensure that they are reimbursing employees at the appropriate mileage rate.

business trip

What Happens If I Have More Than One Vehicle?

If you have more than one vehicle that you use for business purposes, the AMAP rates may differ depending on the type of vehicle. For example, the rate for a car might be different from the rate for a van or a motorcycle.

When it comes to claiming mileage expenses, you will need to ensure that you are using the correct mileage rate for each vehicle. This may require you to keep accurate records of the type of vehicle used for each journey, as well as the purpose and distance traveled.

Can I Claim Mileage For an Electric Car?

Yes, you can claim mileage for an electric vehicle that is used for business purposes, just like you can for a petrol or diesel vehicle. However, the rules around mileage rates for electric vehicles may differ slightly from those for traditional vehicles.

For electric vehicles, the AMAP rate is currently set at 8 pence per mile. This rate is slightly lower than the rate for petrol and diesel vehicles.

It’s worth noting that the cost of running an electric vehicle may be lower than that of a petrol or diesel vehicle, due to lower fuel costs and reduced maintenance requirements. As a result, the AMAP rate for electric vehicles is lower.

Do I Have to Pay Tax For My Company Car?

In the UK, if you have a company car, you will generally be required to pay tax on it if you use it for personal or private use, or for commuting to and from work. This tax is known as the Benefit in Kind (BIK) tax and is calculated based on the type of car you have and its value.

To calculate the amount of BIK tax you will pay, the government uses a percentage of the car’s list price (including any optional extras) and multiplies this by your personal tax rate (based on your salary). The percentage used is determined by the car’s CO2 emissions, with lower-emission cars subject to lower rates.

It’s important to note that if you only use the car for business purposes, and not for personal or private use, you may be exempt from BIK tax. However, if you use the car for any personal or private use, you will need to pay BIK tax on the car.

How to Track Company Mileage Costs as an Employer

Tracking company mileage costs as an employer is an important part of managing your business expenses and ensuring that you are compliant with tax regulations. Here are some steps you can take to track company mileage costs:

  • Establish a mileage reimbursement policy: Before you can start tracking mileage costs, you need to establish a clear policy that outlines how you will reimburse employees for mileage expenses. This policy should specify the rate at which you will reimburse employees, as well as any other requirements or restrictions around claiming mileage expenses.
  • Use a mileage tracking system: There are a variety of mileage tracking systems available, ranging from simple paper logbooks to more sophisticated GPS tracking systems. Choose a system that meets the needs of your business and allows you to easily track and record mileage expenses for each employee.
  • Train employees on how to track mileage: Once you have a mileage reimbursement policy and tracking system in place, you need to train your employees on how to use it. Make sure they understand the requirements for tracking mileage expenses and how to submit claims for reimbursement.
  • Regularly review and audit mileage claims: It’s important to regularly review and audit mileage claims to ensure that they are accurate and compliant with your reimbursement policy. This can help you identify any errors or potential fraud and ensure that you are only reimbursing employees for legitimate business travel.
  • Keep detailed records: It’s important to keep detailed records of all mileage expenses, including the date of the journey, the purpose of the journey, the starting and ending locations, and the distance travelled. This will help you accurately calculate the amount of reimbursement owed to each employee and provide documentation in case of an audit.
  • Use technology to simplify the process: There are a variety of software and mobile apps available that can simplify the process of tracking and managing mileage expenses. These tools can help you automate the process, reduce errors, and provide real-time visibility into your business expenses.

By following these steps, you can effectively track company mileage costs, reduce the risk of errors and fraud, and ensure that you are compliant with tax regulations.

tracking mileage

Final Thoughts

In conclusion, understanding car mileage rates for company cars in the UK is important for both employees and employers. Employees need to be aware of the mileage reimbursement policy and how to track their mileage expenses in order to receive the appropriate reimbursement for their business travel. Employers need to establish a clear mileage reimbursement policy and implement a tracking system to accurately track mileage expenses and ensure compliance with tax regulations.

With the rise of electric vehicles and changing environmental regulations, it is important to keep up to date with any changes to the tax regulations around company cars and mileage reimbursement. Employers should also consider offering incentives for employees who choose to drive electric vehicles, as this can help reduce costs and emissions.

Overall, tracking company mileage costs can be a complex process, but by using the right tools and following best practices, it can be simplified and streamlined. By doing so, employers can effectively manage their business expenses and employees can be assured that they are being reimbursed accurately for their business travel.

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