Mileage Allowance Payments (MAPs) are what you pay your employee for using their own vehicle for business journeys. You’re allowed to pay your employee a certain amount of MAPs each year which are exempt from tax. This is called an ‘approved amount’.
Here is a breakdown of the ‘approved amount’, it does not matter if your employee uses more than one vehicle in a year – it’s all calculated together.
- Cars and vans – 45p per mile for first 10,000 miles and 25p per mile for anything above 10,000 miles.
- Motorcycles – 24p per mile, even for miles above 10,000.
- Bikes – 20p per mile, even for miles above 10,000.
Example 1
Your employee travels 12,000 business miles in their car – the approved amount for the year would be £5,000 (10,000 x 45p plus 2,000 x 25p).
Payments above the ‘approved amount’ will not be exempt from tax, tax will be needed to be paid via P11D submission or extra taxable pay added to the monthly payroll.
Payments below the ‘approved amount’ you will not have to report to HMRC or pay tax, but employee will be able to get tax relief (called Mileage Allowance Relief, or MAR) on the unused balance of the approved amount via their tax return.
Example 2
Your employee travels 11,500 business miles in their car, the employer reimburses at 15p per mile for a total of £1,725. The maximum claim is £4,875 (10,000 miles at 45p, and 1,500 at 25p), so employee has a shortfall of £3,150 and can claim tax relief on their tax return. If the employee pays tax at the basic rate, they can claim a refund of £630 (20% of 3,150); or £1,260 if they are a higher-rate taxpayer (40%).
Regarding NI, the rules are like the above, just there is no 10,000 miles limit, all miles will be at the original rates mentioned (for NI purposes called the ‘qualifying amount’).
Payments paid according to the ‘qualifying amount’ are exempt from NI. Payments above the ‘qualifying amount’ will not be exempt from NI, they need to be added to the monthly payroll. Payments below the ‘qualifying amount’, no relief can be claimed back.
If your employee carries another employee in their own car or van on a business journey, you can pay them passenger payments of up to 5p per mile tax-free. You will not have to report this to HM Revenue and Customs (HMRC) or deduct and pay National Insurance on them either.
