Mileage Allowances

Under the mileage Allowance Payment Rules, the maximum tax-free mileage allowances for employees using their own cars for business are as follows

2008/2009

First 10,000 miles

Miles over 10,000

Cars

40p

25p

Motorcycles

24p

24p
Bicycles 20p 20p
Passengers 5p 5p

Payments in excess of these rates are taxable. Payments at less than these rates – employees can claim tax relief for shortfall. 

 Vehicle Benefits

Chargeable on employees earning £8,500 or over (including expense payments and benefits) and directors. The charge is linked to the list price of the car and a factor relating to the level of carbon dioxide emissions and whether the engine runs on petrol or diesel.

Ratings

Petrol

Diesel
0 - 135g/Km 15% 18%
Over 135g/Km +1% for each extra 5g/Km
Maximum 35% 35%

Cars with emissions rating of up to 120g/Km will now qualify for a special low tax charge of only 10% (13% diesel) of the list price.

Notes

1

The list price relates to the day before the first registration and includes accessories, delivery charges and VAT. The price is subject to an upper limit of £80,000

2

The list price is reduced by the employees capital contribution when the car is first made available, subject to a maximum deduction of £5000

3

Special rules apply to older cars which do not have a CO2 rating.

4

Company vans are charged at £3000. If private use is more than home-to-work travel, if fuel is provided free for private use there is a tax charge of £500

5

Payments by employees may reduce the above benefits



Car Fuel Benefit

The benefit will be calculated using the same percentage as that used for the car benefit, applied to a standard figure of £16,900. The taxable amount will therefore be between £1690 (min.) and £5915 (max.).

 

Car fuel benefit is reduced to nil if employee pays for all private fuel. In practice this means the employee should pay for all fuel personally and reclaim the cost of fuel used on business miles. The Inland Revenue have produced the following rates:-

Engine cc Petrol Diesel LPG
Up to 1400 cc 12p 13p 7p
1401 - 2000cccc 15p 13p 9p
Over 2000 cc 21p 17p 13p

 Employers may currently reclaim the VAT element using these rates, provided a valid VAT invoice accompanies the claim.