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Mileage allowance increase?

The mileage allowance has stood at 45p per mile for over 10 years now

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I was hoping that today's announcement by the chancellor would include an increase in the 45p per mile approved allowance, but it doesn't seem to have been considered.  I am starting to get questions from clients about paying higher allowances to keep up with the daily hike in fuel prices.  I don't suppose anyone has heard any rumours about increasing that or any groups lobbying for an increase?

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By Hometing
26th May 2022 16:16

I've been thinking this myself. I have a quite thirsty one and it genuinely costs me about 30p/mile...

I recall a benchmark around 15p/mile being for consumption and the remainder for W&T

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By Mr_awol
26th May 2022 16:33

To be honest im not particularly excited about this as, although fuel prices have been increasing, fuel efficiency has too, and ive found car repairs and maintenance costs static or reducing, actually. Admittedly the purchase price has leapt up.

Overall given HMRCs company car policy id be very surprised if they had any sympathy for anyone who chose to drive a (decent?) car with high fuel consumption and would be amazed if they increased the 45p/mile.

What i do find scandalous, and much more worthy of attention, is the fact that the HICBC threshold has been static for almost as long as the mileage rate.

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Ivor Windybottom
By Ivor Windybottom
26th May 2022 16:39

It seems (https://www.racfoundation.org/data/uk-pump-prices-over-time) that it only really the last couple of months that 45p has actually fallen significantly behind.

If I recall correctly, HMRC used to publish (many years ago) how they calculated mileage rates, taking into account things such as AA membership... those were the days!

We'll all be electric before too long, so I wonder if HMRC are just holding out on the 45p rate pending bigger changes.

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By David Ex
26th May 2022 16:58

Easy to excuse as the Government can just argue they’re being “green” by discouraging car use.

I think many employers have managed to ditch company car schemes with similar sleight of hand.

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By DKB-Sheffield
26th May 2022 17:03

Wouldn't it be counter-productive for a Government, committed to significant 'net zero' targets to increase AMAP rates?

My car currently runs at around 15p per mile. It's not a 'super-efficient', hybrid, but, it's not bad. If I was running at 30p per mile, or even 45p per mile that would suggest it to be more of a 'gas guzzler'. Completely against any net-zero strategy

I'm not an environmentalist, or a climate change campaigner but, I can see how an increase in AMAP (to aid those with less efficient cars) would be counter intuitive!

Possibly a temporary increase until fuel rates decrease but, increasing is one thing, decreasing again is a whole different story (i.e. it would never happen!)

Incidentally, I didn't hear many arguments for reducing AMAP rates when fuel prices plummeted 2020?

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Replying to DKB-Sheffield:
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By DJKL
30th May 2022 12:51

The 45p should cover everything, fuel, repairs, insurance and of course using up the car, if the 45p was just for fuel then it is excessive but if it is absorbing the cost of the car over its estimated life/total mileage then it does not seem that high. (Appreciate cars devalue generally as a function of both miles driven and time)

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Replying to DJKL:
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By DKB-Sheffield
30th May 2022 13:57

DJKL wrote:

The 45p should cover everything, fuel, repairs, insurance and of course using up the car, if the 45p was just for fuel then it is excessive but if it is absorbing the cost of the car over its estimated life/total mileage then it does not seem that high. (Appreciate cars devalue generally as a function of both miles driven and time)

I'm certain you'll be understanding of the fact I am aware that the mileage rate covers more than just fuel. However, the OP specifically refers to the daily fuel price hike - citing this as the reason for increasing the approved rate.

Whilst inflation has seen increases in 'raw motoring costs' since 2011, there have been significant increase in the efficiency of vehicles (mpg). I don't have the 'actual' figures but do recall it being highly unusual for a vehicle to exceed 45mpg in 2011, whereas now 70mpg+ is not unheard of!

Admittedly, prices at the pump are currently very high (£1.80+ near me), and cf. May 2020 (£1.00 near me) have seen a significant rise. However, there was a significant drop (from £1.40+ near me) in March 2020. At no point did anyone suggest reducing mileage rates in May 2020 - despite the drop in £/l from March 2020 being equivalent to the increase we have today against that same 'benchmark'.

I clearly appreciate the depreciation factor, however, the second-hand car market is extremely fluid. Currently, the true market depreciation of vehicles (as opposed to accounting estimates, or WDV) has been somewhat stagnant since 2020. Indeed, and in my experience (clients 'in the trade') it is not currently unusual for a second-hand vehicle to retail at a higher price than it would in 2020, despite added age and mileage!

Clearly, the depreciation matter will soon subside, but then I'd expect the same to happen to oil prices. If oil prices remain at the current highs for prolonged periods, HMRC may need to act. However, increasing now, may well be seen as knee-jerk and against net zero policies.

If, however, a *temporary* increase were applied (say to 60p) this would have to be time-limited. It may also need to be index-linked (to fuel prices) leading to a potential recalculation of the entire allowance. Such a recalculation could actually lead to a lower rate based on improved vehicle efficiency since 2011!

Finally, and absolutely, approved mileage rates are not in place to reimburse drivers for time (as aluded to elsewhere in the thread). Nor do they represent the maximum or minimum an employer can pay. I know employers who - for simplicity - pay 25p (per their contract which confirms additional tax relief may be available), and a major leisure company pay around £1 when towing a caravan/ trailer. Both pay 'travelling time' in addition.

In brief, be careful what you wish for! A short term increase may be attractive BUT this may lead to lower allowances in future.

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By Hugo Fair
26th May 2022 17:57

No ... I've not heard any rumours about increasing the Approved Mileage Rates (and wouldn't expect them to rise - ever).
There's nothing to stop your clients paying higher allowances to keep up with the daily hike in fuel prices ... but if it's not a company car and they pay more than the AMR then it becomes taxable.

As others indicate ... if your clients are driving cars where 45p/mile is insufficient to cover their cost of petrol/diesel then they need to replace the car (for economic as well as eco reasons).
The AMR is meant to cover (only approximately as it's a flat rate) a proportion of the cost of owning and running your vehicle - e.g. road-tax, MoT, insurance, servicing & depreciation.
A hint as to the split between those 'overhead' elements and the fuel can be gleaned from the drop in rate from 45p/mile to 25p/mile for mileage over 10,000 in a year.

Frankly it's been a money-spinner for many employees for years and years - and, in line with the eco targets (as well as saving public finances), there's no incentive or logical reason to increase the rate.

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Replying to Hugo Fair:
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By emanresu
26th May 2022 21:35

Hugo Fair wrote:

... There's nothing to stop your clients paying higher allowances to keep up with the daily hike in fuel prices ... but if it's not a company car and they pay more than the AMR then it becomes taxable.

Quite, and today's Sunak announcements were telegraphed ahead as being about forthcoming household inflation - particularly domestic electricity and gas prices. Now there's a can of worms!

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Replying to Hugo Fair:
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By thevaliant
26th May 2022 23:33

I suspect your point of view is seen from someone who is self employed, or would only have short mileage claims anyway.

The fact of the matter is that mileage, for me, as an employee of an accountancy firm, covers my costs. Or at least should. But yes, it's also been a slight 'here's a bit of cash for your trouble'.

For many many years, my firm has taken on clients that are, to be frank, quite some considerable way from our office (We are a small, one location firm, but we try and punch above our weight by doing audits of LARGE groups). I have found myself driving, daily, 42 miles to a client and 42 miles back through heavy traffic. The expectation has been I've to arrive at the clients at 9am, and I leave at 5pm. This has meant, because everyone loves the M6, leaving the house not at 8am, but 7.30am. And it has meant not getting home at 5.30pm where I to go from the office, but getting home some nights at 7.15pm.

The mileage rate is supposed to cover the costs. If 62p covered the cost of mileage in 1999 (which it did if your car was 2000cc or more) then I fail to see how it can now cover those same costs at 45p per mile, when fuel isn't 69p per litre anymore, and an MOT £20, a service £80 and insurance around about £100.

I'm well aware some do claim as a money spinner. I've always claimed the difference between my home to the office and my home to the client. I have several clients I don't claim for, as the distance is less.

So yes, I'm a bit Soviet Unioned off that the mileage isn't changing. Sooner or later, it will be uneconomical to drive to a client - I'll actually lose money doing so. Perhaps it would then be time to look for another job, one that didn't involve so much travel.

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Replying to thevaliant:
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By Hugo Fair
27th May 2022 00:33

I don't have a 'point of view' ... I was merely explaining the basis for my answer to OP's question (the multiple reasons why I don't expect to see the rate increased).

FWIW based on your numbers ... and in very round numbers to keep things simple ... you are driving 84 miles/day (some of which you indicate is non claimable) for, let's say, 40 weeks p.a. That's roughly 16,800 miles p.a. (of which maybe 14,000 are business/ non-commuting).
In any modern car I would be very upset to get less than 35 mpg in average road conditions ... so approx 400 gallons of petrol.
Even at today's ludicrous prices that would cost you c. £3,000 p.a. ... but your claim (at 45p then 25p per mile after the first 10,000 miles) would total £5,500.

Whether the tax-free 'profit' of £2,500 p.a. is adequate compensation for (the business proportion of) your other overheads ... only you can judge.
But the fact that it is less generous than in the past doesn't automatically make it unfair (which of course is not always the intention of tax law anyway).

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Replying to thevaliant:
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By Mr_awol
27th May 2022 09:37

thevaliant wrote:

The fact of the matter is that mileage, for me, as an employee of an accountancy firm, covers my costs. Or at least should. But yes, it's also been a slight 'here's a bit of cash for your trouble'.

For many many years, my firm has taken on clients that are, to be frank, quite some considerable way from our office (We are a small, one location firm, but we try and punch above our weight by doing audits of LARGE groups). I have found myself driving, daily, 42 miles to a client and 42 miles back through heavy traffic. The expectation has been I've to arrive at the clients at 9am, and I leave at 5pm. This has meant, because everyone loves the M6, leaving the house not at 8am, but 7.30am. And it has meant not getting home at 5.30pm where I to go from the office, but getting home some nights at 7.15pm.

The mileage rate is supposed to cover the costs. If 62p covered the cost of mileage in 1999 (which it did if your car was 2000cc or more) then I fail to see how it can now cover those same costs at 45p per mile, when fuel isn't 69p per litre anymore, and an MOT £20, a service £80 and insurance around about £100.

You seem to be accepting that the profit on the AMAP rates was a Brucie bonus, but also suggesting that your firm doesn't pay you for travel time.

We don't pay overtime for managers and above if it is the odd bit here and there, leaving home half hour early for a course or to see a client, etc (neither did my last firm) but if someone was habitually spending an extra four hours a day being sent to places we wanted them to go, they'd be getting paid for it, one way or another. Maybe they'd get o/t, maybe TOIL, maybe they'd be on a larger salary to reflect the type of work/hours/travel they were doing. Are you saying you get none of that? If you do, then it's completely irrelevant to the AMAP profit you used to make.

As for the 62p/mile (actually 63p i believe) remember that the threshold was only 4,000 miles back then - it subsequently dropped to 36p for the >2.0 engines. As a result, if someone did 10k miles per annum in a >2.0 they would get (4,000 x £0.63 = £2,520) + (6,000 x £0.36 = £2,160) = £4,680 whereas now they'd be getting £4,500 so on change from the old rates to new, there may have been little difference. Obviously there'd be winners and losers for lower/higher mileages.

You say that as an employee the AMAP "covers my costs. Or at least should". Are you saying it doesn't? And by that i don't mean pro-rata servicing/depreciation/etc on a per mile basis, but the actual ADDITIONAL costs of the business motoring.

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By Open all hours
26th May 2022 19:11

I used to spend an average of £2/day on tyres.
Still wish I’d kept that R32 Golf.

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Replying to Open all hours:
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By Mr_awol
27th May 2022 09:39

I once had a car that only ran on super unleaded and seemed to drink almost as much (stupidly expensive) oil as it did petrol. Despite this, and the fact that mpg was in the very low 20s, i do often wish id kept it, especially as i drive much fewer miles now.

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the sea otter
By memyself-eye
28th May 2022 16:44

I (used to) push mine for the first mile or so, to even out the cost......
Now I'm retired I push it all the way.

(you have to with MGB's)

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By Nebs
30th May 2022 09:55

If the government want us to all drive electric cars then they should phase out the 45p/mile for petrol and diesel vehicles between now and 2030. Maybe reduce it by a shilling a year. And in tandem they could slowly remove all tax relief for all businesses for all motoring costs for petrol and diesel vehicles.

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Replying to Nebs:
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By Hugo Fair
30th May 2022 12:29

Quite ... but what leads you to expect any sudden introduction of 'joined-up thinking' in govt policy circles?
They have, after all, decided to 'hide' the true increase in cost of gas supplied to consumers ... by forcing the energy suppliers to subsidise it via a transfer of most of that increase to the costs they charge to consumers for electricity!
"We'd like you to stop using gas and use electricity instead, so we've f***ed up the pricing differential in order to make our policy unattractive"!

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By johnacarpenter
30th May 2022 17:22

I have a number of employed clients who travel long distances in the performance of their duties. one of whom travels over 30,000 miles per year covering the whole of the south of England from Derby.
He receives 17p a mile, the balance of the costs is 45p a mile less the 17p a mile 28p a mile to fund purchase of the vehicle, maintenances road tax, commercial insurance etc. So at best that's 20% of 28p i.e. 5.6p per mile. All of these costs have increased.
It goes nowhere near funding the expenses that are actually incurred.

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Replying to johnacarpenter:
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By Hugo Fair
30th May 2022 17:56

First ... it's much worse for your client than you indicate since the difference is only 28p/mile for the first 10,000 miles per tax year - and then drops to 8p/mile for the remaining 20,000 miles.

Second ... so what? Taxation does not set out to deliver a morally defensible set of equitable outcomes, it is a set of instruments designed to achieve policy objectives whilst raising revenue. And those policy objectives do not include supporting the existing (let alone increased) use of driving as part of employment.

If the individual is 'out of pocket' then he/she may have a valid gripe with their employer (and the option to take a different job), but that's not the responsibility of the tax system any more than it would be (say) to subsidise the wages.

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