As it is normal procedure for many companies to reimburse their employees for the use of their personal cars when going on business trips, many ask themselves: What mileage rate can I claim if I get a car allowance? But the topic is also interesting for businesses which offer company cars to get around. We have looked into the topic to gather all the important information.
What is a mileage claim rate?
Being able to deduct taxes for business-related travelling is a good thing for team members and companies alike. Every tax year, every one of us is eligible for a certain amount of mileage expenses. These are calculated by the number of miles driven in the past twelve months.
The HMRC has guidelines to simplify and unify the process. They regularly publish special rates, which help employees and businesses get reimbursed for the use of their vehicles. Up to that amount per mile they will not be subject to taxation, so it is wise to make full use of the mileage claim rate if people travel a lot for work in order to save money in the taxation process. The rate is supposed to cover all occurring costs when going on a business trip. This includes fuel, depreciation, road tax, depreciation, oil, and further services the car usually needs to be maintained over the years.
What mileage rate can I claim?
There is a mileage claim rate for employees who use personal vehicles to get around for business travel. This is called mileage allowance payments (MAP). This type of mileage claim rate can reimburse the following:
- Travelling between offices
- Visiting clients
- Travelling to unusual work spaces to fulfil work duties
- Attending conferences or seminars for the job
- Helping out a colleague to ensure that they can do their job
These requirements are the most common cases in which the mileage claim rate applies. But it should be noted that the daily commute to work or trips under ten miles are not covered here. Also, trips with a solely or primarily personal purpose are not eligible either.
Besides this, there is a business mileage claim rate called an advisory fuel rate. This one usually applies to company cars, so organisations can get reimbursed for travel expenses and receive repayment of fuel costs when employees use their cars for private matters. However, it is worth mentioning that employers can apply their own rate if the costs are higher than what HMRC suggests or if highly efficient vehicles are used for business trips. In those cases, it is important to fully explain the higher cost to avoid the creation of taxable profit.
HMRC mileage allowance payments (MAP) 2022
The following are the approved mileage rates by the HMRC which have been valid since the tax year 2011/12 and therefore currently apply to all employees seeking to claim when using personal vehicles for business travel:
|From the tax year 2011/12 onwards||First 10,000 business miles in the tax year||Each business mile over 10,000 in the tax year|
|Cars and vans||45p||25p|
To calculate your MAP, you need information on the travelled business miles per year. Here is an example: An employee has driven 20,000 miles with their car to visit clients all over the UK. They can claim:
£0.45 x 10,000 = £4,500
£0.25 x 10,000 = £2,500
The total reimbursement is £7,000. Business costs usually are not subject to tax. Therefore, employees can deduct them against revenue. There is also an additional 5p per passenger per business mile when carrying fellow employees in a car or van. It is mandatory that these are business trips for them as well. People working for a health trust could be eligible to receive even more. There is a rate of 56p per mile for the first 3,500 miles in a year, for any miles thereafter, there are 30p. When team members go by motorcycle or bicycle, the rate drops accordingly, as there usually is less tear and wear to consider.
If a company has agreed to pay a mileage allowance for the workers, they are not obligated to pay the MAP rates mentioned above. It is possible for them to set their personal rate, which, for example, can be 30p only. In those cases, employees are eligible to claim the other 15p by deducting their taxes. However, they cannot claim more than 45p without also paying more taxes.
Good to know: The tax contribution benefit-in-kind (in short: BIK) can affect employees with company benefits. If these are not part of their salary, for example when using a company-held car for personal matters, we need to handle this employer favour as a taxable issue.
HMRC advisory fuel rates 2022
HMRC is evaluating the advisory fuel rates four times a year to adjust them to the current status and situation. The latest adjustment to company car mileage rates has been published on 1 June 2022.
|Engine Size||Petrol||Diesel||LPG||Fully Electric|
|1,400cc or Less||14p||9p||5p|
|1,600cc or Less||13p||5p|
|1,401cc – 2,000cc||17p||11p||5p|
|1,601cc to 2,000cc||16p||5p|
The rate gets calculated with regard to the current fuel price. Reimbursement takes into account which car is used by reflecting the engine size as well as the fuel type.
Business mileage claim rate: how to handle hybrid and electric cars
Technology is constantly developing, and over the last decade, we have seen more and more hybrid and fully electric cars on our roads. Considering advisory fuel rates and mileage allowance payments, HMRC handles hybrid cars just like diesel- or petrol-fueled cars. However, fully electric vehicles are still reimbursed at 5p per mile.
Taxwise, electricity is still not considered fuel. This situation can cause people to still act apprehensive about switching to a more climate-friendly car or, in case of businesses, updating their fleet to low-emission vehicles. But regarding the rising energy prices, this might change soon, though. If there is any good news on that topic at the moment: There is no limit after 10,000 miles and the rate does not drop the more people drive.
The benefit of handing out keys to a company car
Being able to use a company car has several benefits for team members. One that usually comes in especially handy is the possibility to use it for personal matters, too. This means that the employee does not need to buy or lease their own vehicle. Maintenance and other costly purchases are paid for by the company which relieves them from covering expensive costs themselves.
This financial advantage often boosts motivation and therefore benefits a business tremendously. Combined with flexible and easier travelling, it might easily be one of the greatest forms of gratitude a company can give out. On top of that, it also shows others that a company truly cares for their employees and is doing financially well.
Of course, no employee we know is doing well enough to voluntarily burn money. Giving them the keys to a company car or a fixed allowance to use for their personal car might seem like a generous move, but should also be carefully considered to avoid unnecessary taxes. The only tax-free way there is today is receiving reimbursement for business miles through the approved mileage allowance by HMRC. To avoid the gesture to backfire, it is recommended to set clear guidelines for team members before they regularly use their personal vehicles for business issues.
Mileage claim rate: how Moss can reduce reimbursement tasks
When giving employees the freedom to use a company car for business travel, why not also hand out a corporate card to let them pay for fuel directly? With Moss, providing cards for every team member who needs one is a piece of cake. Businesses not only get rewarded with more satisfied employees, but they also cut down on accounting costs. When fewer out-of-pocket payments have to be made, there are consequently fewer reimbursement tasks that need approval.
On top, every company can gain impeccable real-time insights with Moss. Knowing when your money is used and what it is used for, enormously helps with budgeting tasks and planning ahead. Team members without a corporate card who need to be reimbursed for business-related purchases can use the smart OCR-scanning software to digitise receipts on the go. A lost or destroyed proof of purchase caused you trouble? Thanks to Moss, this will be an issue of the past!
The mileage claim rate helps you get reimbursed for business-related travel. There are different rates for the use of personal vehicles and company cars. That is why employees and businesses alike can claim expenses to reduce their taxes each year.
The mileage claim rate for 2022 is 45p per mile for the first 10,000 miles and 25p per mile after that. For motorcycles, the rate is 24p per mile, and for bicycles, HMRC set it to 20p per mile. All rates apply to business-related trips only.
For mileage allowance payments (MAP), you can claim 45p per mile for the first 10,000 miles and 25p per mile after that when driving a car or van. The advisory fuel rate for company cars depends on the engine size and the fuel type.
A car allowance means that an employer pays you a certain amount of money to use your personal car on business trips. Therefore, you can use the MAP rate to calculate your reimbursement, but please note that the company is not obligated to pay the usual 45p per mile.
The mileage allowance is supposed to cover all occurring costs when going on a business trip with your personal vehicle. This includes fuel, depreciation, road tax, depreciation, oil, and further services the car usually needs to be maintained over the years.
HMRC handles hybrid cars just like diesel- or petrol-fueled cars. For fully electric cars, there is a rate of 5p per mile. The reason for the lower rate: electricity currently is not regarded to be fuel. However, this might change soon to reflect the current surge in energy prices.