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Mileage Disbursements - Know How Much You You're Entitled To

By Edited Feb 29, 2016 0 0

If you use your own car for business use you are entitled to a mileage reimbursement. Driving to and from work is classified as social and domestic use and not business use, therefore you won’t get a mileage reimbursement for the journeys to and from the office. 

If, however, you use your own car for travelling around to see different clients, or travelling around to see different customers or suppliers etc. this is classified as genuine business mileage and a mileage reimbursement is available for these journeys. The mileage reimbursement is only fair especially since it is a genuine business expense that is incurred by the employee. 

Many people think the mileage reimbursement is paid solely to cover the cost of fuel however this is not the case. Cars are expensive things to own and there are many costs associated with owning a car besides filling the tank. A car owner has to tax the car, insure the car, put tyres on the car and keep it in good working order, all of which costs money. The mileage reimbursement amount is supposed to cover all the costs of motoring. 

The petrol pump. The only way to get the ever increasing expensive petrol or diesel in to your car.

Petrol pumps

Providing the mileage reimbursement is in line with the predetermine mileage reimbursement rates the cash received for mileage reimbursement is tax free. Even if the amount is paid over with the employee’s salary the mileage reimbursement is not subjected to payroll tax. So, what are the current mileage reimbursement rates? 

If you use your own car or van for business the authorised mileage reimbursement rate is 45p per business mile for the first 10,000 miles and 25p per mile for every business mile thereafter. The authorised mileage reimbursement has recently been increased to 45p per business mile. Previously it was 40p per business mile and it had been at that level for many years. 

It is possible to claim an even larger mileage reimbursement if you carry passengers on business activities with you. If you take passengers you can claim an additional mileage reimbursement of 5p per passenger per business mile travelled. 

If you use your own motorcycle for business use you can also claim a mileage reimbursement for all business miles travelled on the motorcycle. The authorised mileage reimbursement rate is 24p per business mile travelled on the motorcycle. The 24p is fixed regardless of the amount of business miles you travel. 

The Triumph Speed Four. You can even claim mileage disbursements for business use of your private motorcycle.

Triumph Speed Four in roulette green

You can also claim a mileage reimbursement if you use a bicycle for business use and the authorised mileage reimbursement rate is 20p per business mile. The 20p is fixed regardless of the amount of business miles you travel. 

Most employers will give a mileage reimbursement directly to their employees at the end of every week or the end of every month, and this amount is not subjected to payroll tax. 

Some employers are generous and pay their employees more than the authorised mileage reimbursement rate. In these circumstances the additional cash over the authorised mileage reimbursement rate is subject to income tax. 

Some employers do not pay their employees as much as the authorised mileage reimbursement rate. In these circumstances the employee can claim the additional mileage reimbursement by making a claim to the tax man at the end of the income tax year. 

It is worth noting that all individuals who use their own personal car for business use can claim a mileage reimbursement for the business mileage incurred. So, if you are a sole trade or a partner of a business and not an employee you can also claim a mileage reimbursement at the authorised mileage reimbursement rates. Most of the time sole traders and partners will not actually pay themselves the cash for business miles travelled. In these instances you should claim the tax relief by charging the mileage reimbursement amount to the profit and loss account as a motor expense in the business profit and loss account. The double entry is to debit motor expenses in the profit and loss account and credit drawings in the balance sheet. 

If you are lucky to drive a Lotus Elan convertible sports car you can claim mileage disbursements for business use. So you can see your clients in style and get paid for it.

A red Lotus Elan sports car

If you are fortunate enough to have a company car and do not get a fuel allowance, i.e. you pay for the fuel personally, you can also claim a mileage reimbursement for the business miles travelled. In this case the mileage reimbursement rate is enough to cover the fuel element only, since all the other costs of the car are paid for by the business. 

The authorised mileage reimbursement rate for company cars depends on the capacity of the car, i.e. the engine size, and whether the car is powered by petrol, LPG or diesel. The mileage disbursement rates are calculated by the tax man and predetermined. They also remain at the same level regardless of the amount of business miles travelled. 

The  authorised mileage disbursement rate for company cars are as follows; 

  • For cars 1400cc or less that are fuelled by petrol – 15p per business mile
  • For cars 1400cc or less that are fuelled by LPG – 11p per business mile
  • For cars more than 1400cc but less than 2000cc and fuelled by petrol – 18p per business mile
  • For cars more than 1400cc but less than 2000cc and fuelled by LPG – 12p per business mile
  • For cars over 2000cc and fuelled by petrol – 26p per business mile
  • For cars over 2000cc and fuelled by LPG – 18p per business mile
  • For cars that are 1600cc or less and fuelled by diesel – 12p per business mile
  • For cars more than 1600cc but less than 2000cc and fuelled by diesel – 15p per business mile
  • For cars more than 2000cc and fuelled by diesel – 18p per business mile 

If you have a company car and your employer pays you more than the authorised mileage reimbursement rate the additional amount is subject to income tax. If your employer pays you less than the authorised mileage reimbursement rate you can claim the additional at the end of the tax year. 

If you are an employee, a sole trader or partner and use your own car for business purposes you need to keep up to date with authorised mileage disbursement rates to ensure you are getting the tax relief you deserve.

Similarly, if you have the use of a company car, but have to pay for the fuel, and use it for business purposes you need to keep up to date with mileage disbursement rates to ensure you are also getting the tax relief you deserve.

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