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Vehicles driving down the motorway AccountingWEB On the road to increasing mileage rates

On the road to increasing mileage rates


As the Autumn Statement approaches, the ATT has called on the government to raise mileage rates to “better reflect the current costs of running and maintaining a personal vehicle”. Will their representation drive change or hit a dead end?

16th Nov 2023
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The Association of Taxation Technicians (ATT) have submitted a representation urging the government to increase the amount that drivers can be paid tax free for using their own car for work.

The current rate stands at 45p/mile for the first 10,000 miles, which has not been updated since April 2011. The ATT stated that based on the Bank of England’s inflation calculator, the rates should now stand at 63p/mile. 

“As these have been frozen for so long, employees are no longer being reimbursed the true cost of their business travel,” said the tax body. 

The ATT further reported that even if employers choose to pay higher mileage rates, this creates tax implications and increases administration costs. 

The two main recommendations are as follows.

  1. All of the approved mileage allowance payment (AMAP) rates set out in s230 ITEPA 2003, should be uprated to better reflect the current costs of running and maintaining a personal vehicle.
  2. The structure of AMAPs could also be simplified by dropping the two-tier approach for cars based on the total mileage in the tax year, and replacing it with a simpler, single rate.

Helen Thornley, a technical officer at the ATT, explained that the representation is driven by the cost-of-living crisis. “We are now past the fuel price peaks from July 2022, but the cost of running a car is not just about fuel,” she said. “Our concern is that this will particularly affect those at the lower end of the wage spectrum, such as care workers, who have no choice but to use their own cars.”

She also stated that this is not a new concern. “We did raise this earlier in the year as a representation for the March Budget so it’s an ongoing issue.”

Full throttle 

Another testament to the longevity of this topic is from Natasha Heron, tax manager at Telereal Trillium, who started a campaign on increasing mileage rates in the summer of 2022. She appeared on Any Answers Live with Richard Hattersley and Dan Heelan to discuss this issue. 

Heron said, “It is something the government can easily fix. It doesn’t come out of their pocket because you claim back your mileage allowance from your employer and then your employer does get a tax deduction for that cost.

“It has been so outdated for so long,” she continued. “It is something the government should look at regularly to keep it in line with the current situation.”

Dan Heelan agreed, “The mileage rates are not reflective of the world right now.”

Cruising comfortably 

However, when the question of updating mileage rates was posed to the Any Answers community, the response was different. Most readers did not expect it to be addressed in the Autumn Statement. 

AccountingWEB reader, Openallhours wrote, “Fully expect the mileage rate to be quietly ignored. Another stealth measure that we all see but they think we don’t.”

Other members believed that 45p/mile is not a stingy rate. DJKL wrote, “Cars need fewer services these days/have bigger service intervals. They tend to last longer and while they are more complicated, not sure if lifetime running costs are as high as made out.”

Fellow commenter SBS33 agreed, “None of the managers or employees of the three companies I manage the finances of have ever complained about 45p/mile. None of them have suggested it should be higher.”

The Any Answers community didn’t feel like this was an important matter that needed to be addressed. “They need to focus on more important stuff. The high-income child benefit charge should be at the top of their agenda if they’re looking at rates that have been left far behind by inflation,” Mr_awol responded. 

When asked how confident the ATT is on the mileage rates being addressed, Thornley said, “I have very limited hope that anything will change in the near future because it’s probably quite low down on the political agenda at the moment, but we will keep pressing with further representations.”

With this topic going on for some time with no hope for change, do you think there is much mileage in updating mileage rates? Let us know in the comments below.

Replies (2)

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the sea otter
By memyself-eye
17th Nov 2023 12:13

The reason few complain about the current 45p/mile is that many people think this is to reimburse the cost of petrol only - forgetting all the other components of running a car. I don't expect nay change, however.

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By AK Employment Tax Services
20th Nov 2023 08:20

The truth behind this is issue is that there is no debate the limits for the approved mileage allowance payments should be increased significantly.
The tax free limit needs to be calculated (based on the historical basis) being the average cost per mile of running a vehicle. Historically the rate was calculated using the AA rate but it was found this sum included some non- allowable capital costs like those relating to having a garage to park the car.
Certain industry groups suggest it should be calculated just on the added cost of the particular mileage on business so just cost of petrol ignoring other running costs eg servicing/insurance. This is not in accordance with the HMRC historical approach and not fair
Sadly there are a number of groups campaigning for no increase to the mileage rate because they fear if it amended it will discourage people from having a company car. These groups seem to be winning the day in their campaigning to HMRC

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