Calculating Mileage Expense for Employees under HMRC Rules

FAQ: Calculating Mileage Expense for Employees under HMRC Rules

Q: What are the HMRC rules for calculating mileage expenses for employees?

A: Under HMRC rules, employers can reimburse employees for business travel in their own vehicles using approved Mileage Allowance Payments (MAPs). The MAP rates for the 2024-2025 tax year are:

- Cars and vans: 45p per mile for the first 10,000 miles, then 25p per mile thereafter
- Motorcycles: 24p per mile
- Bicycles: 20p per mile

Q: What constitutes business travel?

A: Business travel includes journeys made:

- Between different workplaces for the same job
- To a temporary workplace from the main workplace
- For work purposes, such as visiting clients or attending meetings

Q: How do I calculate mileage expenses for my employees?

A: To calculate mileage expenses:

Track the Miles: Have employees record the number of miles driven for business purposes.
Apply the MAP Rates: Multiply the business miles by the relevant MAP rate.
- For cars and vans: Use 45p per mile for the first 10,000 miles, then 25p per mile thereafter.
- For motorcycles: Use 24p per mile.
- For bicycles: Use 20p per mile.

Example Calculation for a Car:
- An employee drives 12,000 business miles in a tax year.
- For the first 10,000 miles: 10,000 miles × 45p = £4,500
- For the remaining 2,000 miles: 2,000 miles × 25p = £500
- Total reimbursement: £4,500 + £500 = £5,000

Q: What records should employees keep for mileage claims?

A: Employees should keep detailed records of their business journeys, including:
- Date of the journey
- Start and end locations
- Purpose of the journey
- Number of miles travelled

Q: Can employees receive more than the MAP rates?

A: Yes, employers can choose to reimburse employees at a higher rate than the MAP rates. However, the excess amount will be considered a taxable benefit and must be reported to HMRC.

Q: Are there any tax implications for employees receiving mileage expenses?

A: If the reimbursement is at or below the MAP rates, it is tax-free for the employee. If it exceeds the MAP rates, the excess amount is subject to income tax and National Insurance.

Q: How do I report mileage expenses to HMRC?

A: Employers do not need to report mileage payments to HMRC if they are at or below the MAP rates. However, any excess payments must be reported on form P11D.

Q: Can employees claim tax relief on unreimbursed mileage expenses?

A: Yes, employees can claim tax relief on any business mileage expenses that are not reimbursed by their employer. They can do this by claiming Mileage Allowance Relief (MAR) through their self-assessment tax return or by contacting HMRC.

Q: How often should mileage claims be submitted?

A: Mileage claims can be submitted as frequently as agreed between the employer and employee, typically on a monthly or quarterly basis.

For more detailed guidance, visit the HMRC website or consult a tax professional.

Updated on: 09/10/2024