Mileage payments: two schemes  

There are two schemes for tax and NICs on payments to employees for mileage payments:

• the NICs motoring expenses scheme, which deals with relevant motoring expenditure and
• the tax approved mileage allowance payments scheme, which deals with mileage allowance payments.

The two systems are aligned as far as possible, but there are some differences between them and they are explained in this guidance.

For tax: mileage allowance payments

Mileage allowance payments are payments that:

• are made to an employee
• for expenses related to the use by that employee of a vehicle
• for business travel.

For NICs: relevant motoring expenditure

Relevant motoring expenditure:

• includes the aggregate of all motoring expenses paid to, or on behalf of, an employee
• in connection with the use of a privately owned vehicle
• for business travel.

Relevant motoring expenditure is wider in scope than mileage allowance payments for tax.

Exemptions

Under the two systems mileage payments up to a statutory limit can be:

• exempt from tax and
• disregarded from earnings for NICs purposes.

We have prepared a simple checklist that you can use to make payments with no tax or NICs liability.

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