Enter Your E-mail

Under the Approved Mileage Allowance Payments (AMAP) Scheme employers can pay employees tax-free mileage rates when they use their own car for business. Provided that the amounts paid do not exceed the rates set by HMRC, no tax liability arises and there is nothing to report on the P11D.

However, many employees are unaware that if their employer pays them at a rate that is less than the approved rate they can claim a tax deduction for the shortfall. The approved rates for 2015/16 for cars and vans are 45p per mile for the first 10,000 business miles in the tax year and 25p per mile thereafter.

Example:
Nigel uses his own car for work and in 2015/16 undertakes 9,000 business miles. His employer pays a mileage allowance of 30p per mile. Thus, Nigel receives mileage allowances of £2,700 during the year.

However, at the approved rate of 45p per mile for the first 10,000 business miles, Nigel’s employer could pay him a tax-free allowance of £4,050 (9,000 miles @ 45p per mile). This is known as ‘the approved amount’.

Nigel can claim a tax deduction of £1,350 for the shortfall between the approved amount (£4,050) and the amount he is actually paid (£2,700). Assuming Nigel is a higher rate taxpayer paying tax at 40%, this will save him tax of £540.