New announcement. Learn more

CHARTERED ACCOUNTANTS (ICAEW)

News and advice to help make your property business a success

Landlords TaxProperty TaxLandlords Tax ReturnsProperty AccountsProperty Tax ReturnLandlords AccountsChartered AccountantsOnline AccountantOnline BookkeepingOnline Tax ReturnsTax ReturnsYour Online AccountantYour Online BookkeeperBusinessadviceAccountingTaxCashflowSmallbusinessBusinesstipsProperty AccountantTaxplanningVATFurnished Holiday LettingsInheritance TaxPropertyProperty bookkeeperAnnual Exempt AmountBusiness RateCapital AllowancesCapital gains tax propertyComplianceDeductibleexpensesEmployment AllowanceFinanceFinancialmanagementHoliday Lets TaxLandlords AccountantLandlords FinancialMaking Tax DigitalMileage AllowanceMobilephonesOverlapreliefPensionPprProperty Company TaxProperty Tax Deductible ExpensesRent a Room ReliefSDLTSmall BusinessTaxreturnTimetoPayVAT invoice60 day capital gains limitAccrualsbasisAcquisitionsAdvisoryfuelratesAIAirBnBAllowable Business ExpensesAlphabet sharesAmapAnnual Tax on Enveloped DwellingsAppealAssessmentAsset disposalAssociated CompanyAssociated Company Tax RulesBad DebtBad Debt Tax ReliefBaddebtsBadgesoftradeBeancounterBenefits in KindBreakeven PointBudgetBusiness adviceBusiness asset defermentBusiness coachBusiness ContinuityBusiness EntertainmentBusiness ExpensesBusiness Rates ReliefBusiness tipsBusinessgrowthBusinesstypesBuy or Lease EquipmentBuytoletCapital Allowances for CarsCapitalallowancesCar Capital AllowancesCarry Back LossesCgtChange of Tax BasisChatGPTCIS SchemeCommon TenantCompanies ExpenditureCompanies HouseCompany Account DeadlinesCompany Account FilingCompany Strike OffCompany Tax Efficient PropertyCompanyassociationCompanyloanstaxfreeCompulsory Strike OffConstruction Industry SchemeContacthmrcContentmarketingCorporation Tax LossesCorporation Tax New RegimeCorporation Tax RatesCorporationTaxCostsCryptocurrencyDeductible Business ExpensesDepreciationDevelopmentDirectorsDirectors LoansDirectorsloansDisallowable Business ExpensesDiscoveryDisincorporationDividend allowanceDividend Allowance ReductionDividend PlanningDividendsDLADomestic Items Tax ReliefDormantcompanyEmployee DiscountEmployee managementEmployeecompensationpaymentsEmployeeOwnershipTrustEndoflifeplanningEnquiryEnterpriseResourcePlanningEntrepreneurmindsetEquityExpensesExpenses Allowed For TaxEyetestsFHLsFlippingFurnished Holiday Lets TaxGift AidGiftsGrowthhacksHelp to pay tax billsHICBCHMO Licensing FeesHMRC complaintsHoldoverreliefHoliday Lettings TaxHow to apply for a Business LoanHow to Extract ProfitHumourIhtexemptionsIllegaldividendsInfluencersInheritance Tax Nil Rate BandInterestrestrictionInvestment Property TaxJoint TenantKeypersoninsuranceLandlord RepairsLandlords Self AssessmentLate vat registrationLBTTLeadgenerationLeadmagnetLeanbusinessmodelLetting Agent DisbursementsLetting Agent RecharresLettings ReliefLimitedcompanyLong Lets TaxLongserviceLTTMainresidencereliefMakingTaxDigitalManaged LetsManagement accountingMileage paymentMinimumwageMixedusesdltMortgage costsMortgage Interest ReliefNew propertyNewcompanycarfuelratesNewnicrulesNIC 2023 to 2024NIC savingsNmwerrorsNon-taxableOptiontotaxvatOverpayment ReliefPaperformPartnershipPartnershipbusinessesParttimePatternofoccupancyPAYEPAYE by Direct DebitPenaltypointsPension Payments Tax ReliefPerformance-reviewsPeriodsofabsencePersonal financePersonalallowancePersonalguaranteesPostcessationreliefProfitProfit-and-lossProperty AllowanceProperty Development CompanyProperty IncorporationProperty Investment CompanyProperty investor accountsProperty investor tax tipsProperty LettingProperty Rental BusinessProperty TradingPropertyallowancePropertycompanyRecharges by Estate AgentsRegularpaymentsReimbursedexpensesRent your driveRentalRentaroomResearch & DevolopmentResidence ReliefResidential property gainsRetail stock controlRetainedprofitsRoom for rent taxSASalarySDLT changesSection 455 TaxSelective Licences LandlordsSelf AssessmentSelf-employednicSelfemployedSeperationServicechargesSettlementslegislationSimplified ExpensesSmallbizSmallbusinessratereliefSoftwareSpring BudgetStaffpartiesStamp dutySuccessJourneyTax Allowance on DrivewaysTax AllowancesTax DeadlinesTax Filing DeadlinesTax Free ChildcareTax free incomeTax on Company VansTax positionTax ReliefTax tips for landlordsTaxbillpaymentsTaxconsequencesTaxincentivesTaxpositionTaxpositionassetsTaxreliefTaxreliefsTaxsesTerminationpaymentsTipsTrade professionalTransfer AssetsTransfer Assets Between SpousesUndisclosedincomeUnpaid RentVAT Bad Debt ReliefVAT DeadlinesVAT DisbursementsVAT PenaltiesVAT registrationVatpenaltiesVatregisteredVatregistrationthresholdWellbeing
TAGS

Mileage allowances – What can you pay tax-free?

Mileage allowances – What can you pay tax-free?

Employees often need to undertake business trips and it is common practice to reimburse the employee’s fuel costs by means of a mileage allowance. The tax rules allow mileage payments to be made tax-free up to certain limits. However, the rules are different depending on whether the employee is driving their own car or a company car.

Employees using their own cars

If an employee uses their own car for business, you can pay mileage allowances tax-free up to the ‘approved amount’. This is set for the tax year, rather than for each individual journey, and is found by multiplying the business mileage in the tax year by the approved mileage rate. For cars and vans, the approved mileage rate is set at 45p per mile for the first 10,000 business miles in the tax year and at 25p per mile for any further business miles. For motorcycles, the rate is 24p per mile and for cycles the rate is 20p per mile.

The approved amount is the maximum amount that can be paid tax-free, even if the actual cost exceeds the approved amount.

Example

An employee drives 12,000 business miles in the tax year using his own car. The maximum that can be paid tax-free is £5,000 (10,000 miles @ 45p per mile plus 2,000 miles @ 25p per mile).

If the amount that is paid is less than the approved amount, the employee can claim tax relief for the difference between the approved amount and the mileage allowance paid, if any.

If the employee gives a lift to one or more colleagues, you can also make a tax-free passenger payment of 5p per passenger per business mile. There is no corresponding relief if you choose not to make passenger payments.

Company car drivers

If an employee has a company car but pays for the fuel, you can meet the cost of business mileage tax-free, as long as the amount paid does not exceed the current advisory fuel rate. The advisory fuel rates are set by HMRC and are updated quarterly. They are lower than the approved mileage rates because the approved rates also reflect depreciation and running costs, as well as the cost of the fuel. By contrast, the advisory rates are fuel-only rates.

The advisory rates applying from 1 March to 31 May 2023 are as shown in the table below.

Engine size                      Petrol – rate per mile LPG                    rate per mile                     1,400cc or less                   13p                                                            10p                           1,401cc to 2,000cc           15p                                                            11p                                 Over 2,000cc                    23p                                                           17p

 

Engine size                        Diesel – rate per mile

1,600cc or less                     13p

1,601cc to 2,000cc             15p

Over 2,000cc                      20p

If the employee drives an electric company car, you can pay a mileage rate of 9 pence per mile tax-free.