In this section:
- A-Z list of expenses and benefits: short guidance
- Company cars, vans and fuel
- Mileage expenses for business travel in employees’ own vehicles
- Travel expenses and benefits
- Entertainment expenses and benefits
- Childcare
- Medical insurance and treatment
- Loans (including season ticket loans)
- Relocation expenses and benefits
Mileage expenses for business travel in employees’ own vehicles
This guide explains the rules for reporting to us and paying tax and National Insurance contributions (NICs) on any payments you make to your employees to cover the costs of business travel in their own vehicles.
There are two separate schemes that we use to deal with mileage expenses you provide to employees for business travel in their own vehicles – one for tax and one for NICs. This guide explains the differences between the two and sets out how to calculate what you need to report to us and what tax or NICs are due.
On this page:
- The rules for tax
- A sample tax calculation
- The rules for NICs
- A sample NICs calculation
- Passenger payments
The rules for tax
You are allowed to make mileage allowance payments (MAPs) to an employee up to an approved amount each year without having to report them to us and without having to pay any tax on them. These tax-exempt payments are known as approved mileage allowance payments (AMAPs).
MAPs are payments you make to an employee for expenses related to their use of their own vehicle for business travel. Two types of journey count as business travel:
- journeys that form part of an employee’s employment duties (such as journeys between clients’ premises by a salesperson)
- journeys that relate to an employee’s attendance at a temporary workplace
Payments that aren’t made to an employee, or that aren’t related to expenses of business travel in their own vehicle, are not MAPs and cannot be exempt as AMAPs.
The approved amount that you can pay free of tax each tax year is calculated by multiplying the employee’s business travel miles for the tax year by the applicable rate per mile for the kind of vehicle being used, as set out in the table below. Remember that only MAPs can be exempt as AMAPs – other payments or benefits can’t.
So if an employee travels 12,000 business miles in their car or van, the approved amount for the year would be £4,500 (10,000 x 40p, plus 2,000 x 25p).
| Type of vehicle | First 10,000 miles | Above 10,000 |
|---|---|---|
| Cars and vans | 40p | 25p |
| Motorcycles | 24p | 24p |
| Cycles | 20p | 20p |
What to report and pay to us
If the MAPs you pay to an employee exceed the approved amount for the tax year, then tax will be due on the excess. This is payable by the employee – your responsibility is solely to record the excess amount on form P11D if the employee earns at a rate of £8,500 or more per year.
If the MAPs you pay are below the approved amount for the tax year, you don’t need to report or pay anything to us. Your employee will be able to get tax relief (called Mileage Allowance Relief, or MAR) on the unused balance of the approved amount. If you wish, you can make separate optional reports to us of any such unused balances under a scheme called the Mileage Allowance Relief Optional Reporting Scheme (MARORS). Contact your HM Revenue & Customs office if you want to enter the MARORS scheme.
A sample tax calculation
If an employee travels 10,000 business miles in the tax year and their employer reimburses all their miles at a rate of 45p, the tax position would be as follows:
| Item | Amount |
|---|---|
| MAPs | £4,500 (10,000 x 45p) |
| Approved amount | £4,000 (10,000 x 40p) |
| Excess | £500 (4,500 – 4,000) |
In this example, the employer would have to report the £500 excess on the employee’s form P11D.
The rules for NICs
The rules for NICs differ from those for tax in a number of ways. To begin with, we take into account a wider range of expenses. Relevant Motoring Expenditure (RME) for NICs purposes covers:
- MAPs, as described in the section on tax above
- payments which would be MAPs except that they are made to someone other than the employee for the employee’s benefit
- any other payments – except payments in kind – by you (or on your behalf) to the employee (or for their benefit) relating to the use of their vehicle, whether for private or business purposes
In each earnings period, you need to compare the RME for your employee with the qualifying amount (QA) – the maximum amount of RME that can be disregarded for NICs purposes. The qualifying amount is similar to the approved amount for tax purposes, and is calculated by multiplying the employee’s business miles in the earnings period by the applicable rate per mile from the table below. (Note that unlike the tax rules, there is no difference in the rate for cars and vans above 10,000 miles.)
So if an employee travels 1,000 business miles in their car or van, the qualifying amount for the earnings period would be £400 (1,000 x 40p).
| Type of vehicle | Every business mile |
|---|---|
| Cars and vans | 40p |
| Motorcycles | 24p |
| Cycles | 20p |
Detailed guidance on which business miles to use when calculating QA
What to report and pay to us
If the RME provided to an employee in the earnings period exceeds the qualifying amount, then the excess should be added to their other earnings for that earnings period when you are calculating Class 1 NICs (but not PAYE (Pay As You Earn) tax) through your payroll using form P11.
If the RME is below the qualifying amount, you do not have to do anything. Note that there is no NICs equivalent of Mileage Allowance Relief and you cannot carry forward the difference between RME and the qualifying amount to use in a later earnings period.
A sample NICs calculation
If an employee travels 1,000 business miles in the earnings period and the only RME is their employer’s reimbursement of all these miles at a rate of 45p, the NICs position would be as follows:
| Item | Amount |
|---|---|
| RME | £450 (1,000 x 45p) |
| Qualifying amount | £400 (1,000 x 40p) |
| Excess | £50 (£450 – £400) |
In this example, the employer would have to add the £50 excess to the employee’s earnings when calculating Class 1 NICs for the earnings period.
Passenger payments
If one of your employees carries any colleagues in their own car or van on business travel, you can pay them passenger payments of up to 5p per passenger per business mile without having to report them to us for tax purposes or pay NICs on them. The passengers must be employees and they must also be on business.
There is no equivalent to Mileage Allowance Relief (MAR) for passenger payments. If you make no passenger payments or if you don’t pay the full amount allowable, employees are not entitled to any tax relief.
More useful links
Guidance on providing an employee with a company car or van
More about travel-related expenses
An overview of how expenses and benefits work
More detailed information about mileage allowance payments
Guidance on completing form P11D
