EDITOR’S NOTE: This article was first published in 2008. Since April 2011, the mileage rates for using a private car on business have risen to 45ppm.
Use the links at the bottom of this article for the latest on the AMAP rates. Otherwise the general advice remains sound.
MANY small businesses reimburse their staff for using a privately owned car on business. The usual way to do this is to pay the employee a mileage allowance.
The taxman has set statutory rates for this. They are called Approved Mileage Allowance Payments (AMAPs) or, more colloquially, approved mileage rates.
What are the current approved mileage rates (AMAPs)?
For the first 10,000 business miles that an employee drives in their own car, the approved mileage rates are 40 pence per mile. Above 10,000 miles the AMAP rates are 25 pence per mile. Employers may reimburse their staff up to these rates and their staff won’t be liable for tax on it.
Are approved mileage rates the same as advisory fuel rates?
No, they are completely different. Advisory fuel rates apply only to company cars. Approved mileage rates apply only to private cars used on business. The taxman has set advisory fuel rates to make it easier for employers and the Inland Revenue to calculate the tax position when reimbursing employees for the fuel they use when driving a company car on business.
Does the size of the car’s engine affect the approved mileage rates
No. Approved mileage rates are the same for all cars, irrespective of engine size and CO2 emissions. On smaller-engined cars, they are quite generous but they may not cover the costs of employees who drive larger-engined cars.
Why aren’t approved mileage rates higher for thirstier cars?
This is because the government doesn’t want to reward people for driving thirstier, dirtier cars. Instead, it wants to encourage people to drive cars with smaller engines and lower emissions. This is part of its commitment to reduce CO2 emissions.
Why do approved mileage rates change at 10,000 miles per year?
They are higher for the first 10,000 miles each year to take account of annual additional costs, such as business car insurance, wear and tear and the additional depreciation. It is also intended to discourage unnecessary business mileage, again as part of the government’s drive to cut CO2 emissions.
Do employers have to pay the full approved mileage rate?
No. Employers can pay less than the approved mileage rate for staff using their own cars for business mileage. When this happens, the employee can claim tax relief on the difference.
The AMAP tax rates per business mile
- Cars and vans up to 10,000 miles 40p per mile
- Cars and vans over 10,000 miles 25p per mile
- Motorcycles up to 10,000 miles 24p per mile
- Motorcycles over 10,000 miles 24p per mile
- Cycles up to 10,000 miles 20p per mile
- Cycles over 10,000 miles 20p per mile
Further information
- For the latest approved mileage rates, click here
