In our regular Q&A, Croner-i payroll adviser Carla Kennedy, explains the tax liability issues if you decide to pay employees more than the higher approved mileage allowance payment
My company currently pays employees using the Approved Mileage Allowance Payments rates for business mileage. In view of their increased fuel costs, is it possible to pay them more without incurring any income tax charges?
Unfortunately not. If an employer wants to reimburse an employee for the costs of using their own car, then only the Approved Mileage Allowance Payments (AMAPs) can be used. This is because:
- the legislation does not permit the payment of actual costs;
- nor does it permit any agreement to be reached with HMRC (a ‘bespoke agreement’) to pay anything other than the AMAPs.
AMAPs can be paid tax free at 45p for the first 10,000 business miles and at 25p thereafter.
Class 1 National Insurance contributions (NIC) will be due on any payment over 45p per mile – there is 10,000-mile rule here.
