Mileage Claims and Inland Revenue

From 2002, a new legislative system of tax was introduced and National Insurance Contributions (NICs) free mileage rates for business journeys in employees' own vehicles was introduced from 6 April 2002. There are separate mileage claims rates for cars and vans, motorbikes, bicycles and for carrying passengers.

Previous administration systems of authorised mileage claims rates were centred on a car’s engine size but it has now changed and is based upon a single mileage rate for all cars and vans and will be paid by employers without any tax/NIC’s charge, this will also mean that report payments of mileage rates are no longer necessary. For every passenger that travels in the car, an additional 5p is attached free of tax and NICs if the passenger is a colleague making the same business trip.

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This extra supplement will be added to the following tax and NIC rates:

I. Cars and vans-
• On the first 10,000miles of the tax year-40p per mile
• On each additional mile over 10,000-25p per mile

II. Motorcycles- 24p per mile

III. Bicycle- 20p per mile

The existence of the these statutory mileage claims rates will not prevent employers paying higher rates if they choose to do so, but any amount paid in excess of the statutory rates will be liable to tax and NICs. If employers do not pay these rates however, employees may wish to claim tax relief up to this level.

Mileage Claims and Inland Revenue

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