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HMRC Mileage Rates Vs The Increasing Cost Of Fuel

Are you thinking of paying an excess?

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Posted by Helen Beaumont on 27/07/2022 @ 8:00AM

The fixed mileage rates of 45p and 25p per mile are designed to cover the costs of fuel and wear and tear of an employee's car when used for business trips ...

It's a difficult decision for employers when employees come to you with this issue!

It's a difficult decision for employers when employees come to you with this issue!

copyright: imagestock / 123rf

The 25p per mileage rate only applies when the employee travels over 10,000 business miles. These rates apply per employee per tax year. This means the employer does not need to monitor which car is being used by the employee in a multi-car household.

If an employee has a company-supplied vehicle, they cannot use these rates, but instead make a mileage claim that only covers the cost of fuel, providing they are paying for it!

HMRC say a mileage log must be kept with information that includes the date and purpose of the trip, the distance travelled and the start/end address of each trip, which should include postcodes. Mileage cannot be claimed for commuting between home and work.

These mileage rates have remained the same for over 10 years. However, fuel and running costs for vehicles have increased significantly, especially in recent months. If you're thinking of paying more than the 45p per mile and 25p per mile rates, then your employee will find any excess will be treated as taxable income and must be reported on a P11D.

However, HMRC has said that if the cost of business travel is higher than the fixed rates, you can use your own rates, though you must be prepared to keep full and detailed records, with appropriate calculations as proof.

"Keep it simple and use the fixed rates, or pay more and put in a lot of extra work!"

It's a difficult decision for employers when employees come to you with this issue. If you put the work in then you can pay higher rates, but your employee will be taxed on anything additional you pay them.

Until next time ...



Would you like to know more?

If anything I've written in this blog post resonates with you and you'd like to discover more about paying excess mileage rates, it may be a great idea to give me a call on 01908 774323 and let's see how I can help you.

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About Helen Beaumont ...


Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.

Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.

When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.