Help Surrounding business mileage rates

SpookyNerd

Firstly, I am not sure if this is the right section, please let me know if there is a better suited place.

I am looking for advice surrounding the amount per mile that I should / can receive from my work place.
Useful back ground information :
Receive a car allowance
Using own vehicle
All mileage is claimed as home is technically my office

Now at present we receive the HMRC Advisory Fuel Rate. Which obviously was adjusted at the start of March before world events led to the massive price hike.

Around 3 weeks ago I queried with my Company whether they would be increasing the amount we claim per mile in line with the fuel cost increase. They replied that they are bound by HMRC's Approved Mileage Rate and that anything more than that would mean that we would be taxed on the extra as its classed as a benefit.

Now I have been doing some searching and digging. But can not find 100% clarity on my findings. Which are as follows:

As we are using our own personal vehicles. The company can pay up to 45p per miles with no further tax implications. The advisory rates, are just that, advisory, and only set in stone when being used alongside company owned vehicles?

The car allowance has no effect on this either.

Would both of the above comments be accurate?
I am not wanting to claim the full 45p, but at present 18p per mile is fair bit less than what was used last time prices were this high.

Thanks in Advance!

IOWJJBTM2025

I think that you have all the information - It is just that you need to separate two things: -

HMRC tax - You do not have a company car and so as far as HMRC is concerned you can claim 45p per mile for the first 10,000 miles and then 25p per mile for every mile above 10,000 miles per year.

This rate has not changed for years and it is only applicable to business miles - no personal inc. to and from home etc.

This allowance is non taxable and is to contribute towards all aspects of running your personal vehicle.

Amount Company pays you.

Now you should consider what the company pays you which is totally separate.

Your company already pays you an allowance towards you supplying a personal vehicle to be used for business miles. I would imagine that the allowance will come with some conditions. For instance - if you wanted to use a 30 year old Reliant Robin, the company may not be happy. The allowance that you are given will be taxed as income by HMRC. As the company is already contributing towards the running costs of your personal vehicle there may be a condition that states they will only reimburse you at the Advisory fuel rate for company cars for mileage.

In your case I assume you have a 2000cc+ diesel car which the HMRC rate is currently 18p per mile. The rate is based upon Diesel being 642.2p per gallon and your car doing 36.6 miles per gallon. Cost per mile is 17.5p which is rounded up to 18p.

Your company is incorrect by stating that anything more than 18p would be taxable. You are running a personal car and do not pay any benefit in kind towards a company car.

Summary

So according to the company they need to pay you 18p per mile in line with the car allowance payment conditions they have given. If the company wanted they could pay you the 45p/25p rate without HMRC tax implications.

If you can show to your company that you are paying more than 642.2p per gallon (£1.41 per litre) and your car is doing less than 36.6 MPG they may take pity on you and agree to pay you a higher rate. My local Tesco is currently £1.91 per litre for Diesel - Therefore if you are doing 36.6 MPG your cost is 24p per mile. At this rate it costs you £60 out of your pocket to do 1,000 business miles. Explain this to your company and see what the response is?

Albermarle

Plus read your terms and conditions of employment and anything supplementary regarding the car allowance and expenses.

Therefore if you are doing 36.6 MPG your cost is 24p per mile. At this rate it costs you £60 out of your pocket to do 1,000 business miles. Explain this to your company and see what the response is?

You could maybe help your argument that next time the fuel advisory rates are reviewed ( every 3 months ?) then most likely they will be around 24p anyway.

SpookyNerd

https://forums.moneysavingexpert.com/discussion/comment/81962297#Comment_81962297

Excellant, All our contract states is a suitable vehicle, which i would take as being a fairly new reliable vehicle. Which is fair.
I previously went to the company about it and they replied with it has to be 18p as thats the advisory rate. It seems like either they are trying to save some money or they genuinely didnt know that there is a difference between the advisory rate and approved rate rules.

Very much appreciate your time as well!

SpookyNerd

Annoyingly, my MPG would be quite good, however the locations I travel to are not exactly economic roads.

I will be bringing it up though :) appreciate your input :)

https://forums.moneysavingexpert.com/discussion/comment/81962325#Comment_81962325

cc123mm456

In my company the answer to this type of query was usually that the company cannot change the policy.

One problem for the company, is that if they did decide to amend the rates, they would have to be fair and apply that to all the applicable employees. They may have some employees with company cars as well as employees with car allowance.

The problem then is that HMRC would regard any increased mileage rate paid to employees with a company car as a taxable benefit in kind (it is not a BIK to employees with a car allowance as explained above).

The method that HMRC use of calculating the advisory fuel rates at the start of each 3 month period means that there are always going to be discrepancies between the price in the calculation and the actual price that applies throughout each period.

Sometimes the AFR is calculated at a time of higher fuel rates. If the prices drop a little afterwards, then employees would make an overall gain for the mileage claimed in the following 3 months.

So this means that all the mileage payments over a longer period need to be considered when working out how far out of pocket you really are.

One future scenario might be that fuel rates are still high at the next calculation point, 1st June, and then start to drop shortly after that. If that occurred, you could make back any shortfall through the 3 months from that date (this relies on luck of course).

............................
Maybe some good news for you... If you were not already aware, you can make a tax relief claim for your mileage.

Let us know if you were already aware of the tax relief option. If not we can provide more details.

SpookyNerd

https://forums.moneysavingexpert.com/discussion/comment/81962563#Comment_81962563

Oh I completely agree that it should be fair across the board. From my understanding, there is 5 employees that receive Car Allowance, all do similar mileage. As far as I am aware. There is no company vehicles throughout.

Completely understand what you are saying about it might drop after the next calculation, however willing to bet HMRC would drop the amount pretty quick after that. I believe on the site it says that they may recalculate at any time.

The tax relief option, I have done this previously, Does it need doing each year?I am on PAYE and dont fancy going on to Self Assesment

cc123mm456

For a long time, HMRC have recalculated the advisory fuel rates 4 times a year, 1st March, 1st June, 1st September and 1st December, so I don't think that will change.

You do need to make the business mileage tax relief claim once a year, after the end of the tax year, but you don't need to be on self assessment for that.

I'll try to find a template for this, and report on this thread if I can find it.

SpookyNerd

https://forums.moneysavingexpert.com/discussion/comment/81962608#Comment_81962608

Yer from looking at previous years, they have only ever done 4 times a year.

If you do manage to find that template, It would be a great help! Thank you !

Albermarle

The advisory rate is the maximum rate that can be ignored for tax purposes. An employer can pay less ( or more) if they want, and if HMRC increase the rate, the employer could just ignore it and leave it the same. Unless there was some specific mention in the employment contract.

Grumpy_chap

The OP's argument that the employer "could" (and therefore should) pay 45 pence / 25 pence for business mileage without incurring an income tax liability seems a bit disingenuous.

This seems to totally ignore the fact that the OP already receives a car allowance. The 45 pence / 25 pence rates are set and cover all the costs of running a car, not just the fuel costs. From the employer's perspective, to pay this amount would be paying twice.

The employer paying the business mileage at the AFR seems entirely appropriate given the fact the car allowance has already paid. The employer paying all mileage from home is also on the more generous interpretation of the rules.

The best the OP can do is to claim back the tax relief on the difference between actual mileage cost (18 pence) paid and the AMAP rates 45 / 25 pence. If the OP does 1k business miles, they receive £180. Assuming below 10k business miles in the whole tax year, the AMAP would be £450, difference £270. A basic (20%) tax payer will be able to reduce their tax liability by £54.

I am always perplexed by the references to "we could be paid more mileage without resulting in an income tax liability" as a basis for constructing an argument for something to change. Unless the true concern is to align everything with the maximum that can be paid without giving rise to an income tax liability, in which case the OP could present the employer with an overall package to take a salary (including car allowance) set at £12,570 and then to be paid 45 pence / 25 pence for business mileage.