HMRC sets mileage rates that your employees can claim as a business expense per mile for business miles travelled in personal vehicles, whilst remaining free from any additional tax and NI. The mileage allowance doesn’t just cover fuel, it also reflects a fair amount for depreciation, maintenance and insurance.
What is the Mileage Rate for 2020 in the UK?
The mileage rates for the 2020 tax year:
- 45 pence per mile for cars and goods vehicles on the first 10,000 miles travelled (25 pence over 10,000 miles)
- 24 pence per mile for motorcycles
- 20 pence per mile for bicycles
The rates are set under the rules of HMRC simplified Expenses, a way of HMRC making is easier for people to claim for expenses and keeping it fair for everyone in the UK.
Example of Calculating the Mileage Rate
An employee travels to a clients site on 1 August 2020, driving 100 miles away from their normal place of work using their personal car. The employee would be allowed to claim for business travel of 45p x 100 miles = £45.
They need to submit a mileage claim form with details of when and where they travelled to as well as the person they saw.
Note: Travel from home to work is not an allowable business expense.
Paying More than the HMRC Mileage Rates
If you choose to pay more than the HMRC mileage rates, the additional amount will attract additional tax and national insurance, by way of a P11d benefit in kind.
Paying Less than the HMRC Mileage Allowance 2020
The is no impact on a business if they choose to pay less than the HMRC mileage rates and you don’t need to report anything to HMRC.
But if you are an employee of a business and have received less than the standard HMRC mileage rate, then you may be able to claim for mileage allowance relief meaning you’ll get a tax rebate for any unused allowance. This is known as the Work Mileage Tax Rebate
Alternatively, the business could opt to join a scheme called Mileage Allowance Relief Optional Reporting Scheme (MARORS). Under the rules of the MARORS scheme, the employer can issue a report to HMRC of any underpayments on behalf of their employees.
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