“Outdated” mileage rates leave workers out of pocket, warns ATT
People who use their own cars for business trips are being left out of pocket by “severely outdated” mileage rates, the Association of Taxation Technicians (ATT) has warned.
Employees can be reimbursed for business travel tax-free - provided that their employer uses HMRC approved rates. For employees using their own car or van for business travel, these rates are 45p per mile for the first 10,000 miles, and 25p per mile thereafter.
These rates have not been updated since 20111 and the ATT says2 they should now be increased to accurately reflect the cost of using a vehicle for business.
Senga Prior, Chair of the ATT Technical Steering Group, said:
“Freezing mileage rates for the last 12 years means employees are no longer fairly compensated for the real expenses incurred during their business travel. This particularly affects those on low wages, such as care workers, who have no choice but to use their own cars for work.
“The current rates are severely outdated, meaning employees are bearing the financial burden of business travel on behalf of their employers.”
The Bank of England's inflation calculator3 suggests that 45p in 2011 would be equivalent to 63p by August 2023.
Employers do not have to use the approved HMRC rates, but paying higher amounts will cause tax issues for their employees. The NHS, and a number of local authorities, pay rates that vary from the HMRC rates.
Senga Prior added:
“Employers who opt to pay higher rates to better reflect the actual costs of motoring end up creating a tax liability for themselves and their employees.
“If the HMRC rates were updated more regularly - and set at a level that other Government departments and local authorities were prepared to accept - this would simplify the position for employees, introduce consistency between the private and public sector and reduce administration costs across Government.”
Notes for editors
Separate rates apply to motorbikes (24p per mile) and bicycles (20p per mile). These rates have not been updated since 2001.
ATT submission: Reimbursing employees fairly for using their own car for work.
Bank of England inflation calculator.