What pence per mile should I be paying my drivers?
A small business company director wants to know the correct business mileage rate for paying staff in their own cars
RECENTLY my employees have been moaning about the pence per mile rate I pay them for business mileage. At 25p a mile is this too little and should I be paying them more?
Ralph Morton, editor of Business Car Manager, provides the answer on business mileage.
THERE is no right or wrong on this. The actual Approved Mileage Allowance Payment is 45p per mile (from 06 April 2011, 40p until that date), and this can be claimed tax-free by your staff. Although, given the cost of fuel, it is perhaps not surprising that your staff are feeling slightly shortchanged and grumpy.
However, if you pay less, you should make it clear to your staff that they can claim the difference between what you pay – in this case 25p – and the Approved Mileage Allowance Payment (AMAP), which is 45p for the first 10,000 miles: so in your example it is 20p per mile. This relief is called Mileage Allowance Relief.
Both from the perspective of your staff – and you as an employer – there is no tax payable, as long as the approved amount is not exceeded. Beyond 45ppm the employee’s excess will be liable to tax and the excess to National Insurance.
AMAPs can only be paid for business journeys undertaken in a private car. These include journeys made between premises or journeys made to a temporary workplace.
AMAPs can be paid for staff using their own car (45p per mile for the first 10,000 miles, 25p per mile thereafter); if they take a passenger, add an additional 5p per mile; for motorcycles it is 24p per mile; and for cycles 20p per miles.
The allowance is a personal one. So if a staffer changes their car during the tax year, the AMAP allowance does not re-set to zero on the new car.
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