Providing mileage allowance for employees who drive for work has become increasingly popular in recent years. However, with the numerous rules and regulations set by HMRC, it can be quite confusing for both employers and employees to understand how this process works. This article aims to provide a comprehensive guide on the main rules that employers should be aware of when paying out mileage allowance, as well as for employees and self-employed individuals in terms of receiving payments and claiming deductions, respectively.
Mileage Allowance for Employees:
– Should employers provide mileage allowance payments to their employees?
– Although not obligated, many employers choose to reimburse their employees for business mileage.
– Reimbursing employees under or at the approved mileage rates from HMRC allows companies to avoid reporting to the authority.
– Employers can choose to pay the exact amount, less, or more than the approved mileage rate.
– Paying an excess amount per mile will be considered a personal benefit for employees and will be subject to taxation.
– Employees need to submit a mileage log, in line with HMRC requirements, to receive mileage allowance payments.
– Keeping the provided mileage logs on file is essential in case of audit.
Determining Mileage Allowance:
– How to calculate the appropriate mileage allowance for employees.
– Example calculation provided for clarity.
Mileage Allowance for Employees:
– Employees need to be aware if they are being paid MAPs and the rate per mile they are entitled to.
– Familiarity with HMRC’s requirements for maintaining a mileage logbook is crucial.
– Different scenarios explained in terms of tax implications and allowances.
Tax Deductions for Employees:
– When employees are not fully reimbursed for business mileage, they can claim Mileage Allowance Relief (MAR).
– Calculation method for claiming MAR explained.
– Employees have the opportunity to claim extra tax relief for every mile driven that year.
Mileage Allowance for Self-Employed Individuals:
– Self-employed individuals have two methods to claim mileage expenses – simplified vehicle expenses or actual vehicle costs.
– Detailed explanation provided for each method, along with their respective benefits and considerations.
– Additional expenses that self-employed individuals can claim, such as accommodation, meals, and travel.
Claiming Mileage Allowance as a Self-Employed Individual:
– How self-employed individuals can claim mileage allowance through their self-assessment tax return.
– Importance of keeping receipts and mileage logs for five years in case of an audit.
HMRC’s Current Mileage Rates:
– Explanation of the current mileage rates set by HMRC for cars, vans, motorcycles, and bicycles.
– Rates have remained unchanged since 2011, despite inflation and higher living costs.
Maintaining an Accurate Mileage Logbook:
– Requirements for an HMRC-compliant logbook.
– Options for keeping a logbook – paper, spreadsheet, or mobile application.
– Benefits of using a mobile application, such as Driversnote, which creates HMRC-compliant records.
– Encourage readers to explore the HMRC mileage guide or visit the official HMRC website for further information.
– Highlight the importance of understanding mileage allowance rules and regulations for both employers and employees.
– Emphasize the value of maintaining accurate mileage logs and keeping track of necessary documentation.