Tax-free mileage benefits
When you use your personal vehicle for work-related trips, excluding commuting, you may qualify for a tax-free benefit from your employer. This benefit, known as a Mileage Allowance Payment (MAP), applies when employees use their personal car, van, motorcycle, or bicycle for business purposes. It’s a way for employers to compensate employees for the wear and tear on their personal vehicles when used for business purposes.
Approved mileage rates by HMRC
Employers typically calculate these payments based on a fixed rate per mile, which varies by the type of transport used. The HM Revenue and Customs (HMRC) publishes these approved mileage rates. For cars, the first 10,000 business miles are compensated at 45p per mile, and every additional business mile at 25p. Bicycles and motorcycles have equivalent payments of 20p and 24p per mile, respectively. These rates, unchanged for many years, will continue to apply for the 2024-25 tax year.
Additional benefits and considerations
If you carpool with colleagues for business trips, you can claim an extra 5p per business mile for each eligible passenger. However, if your employer pays less than the published rates, you can claim tax relief for the difference using Mileage Allowance Relief (MAR). Unfortunately, there’s no MAR equivalent for passenger payments.
The MAP offsets costs of using your personal vehicle for business. It’s a benefit that helps you financially. It encourages the use of personal vehicles for business. This can reduce the company’s need for a large fleet. However, understanding the rules and rates set by the HMRC is essential. This ensures you’re not inadvertently incurring a tax liability. Always keep accurate records of your business mileage. Always consult with a tax professional if you’re unsure about any aspect of the MAP.
