Budget – Mileage allowance paymentsThursday, March 24th, 2011
For employees required to use their own car or van for work, the approved mileage rate for cars and vans will increase, from April 2011, to 45p per mile (up from 40p) for the first 10,000 miles in a tax year, and 25p per mile thereafter. For NICs purposes, the new limit is 45p per mile irrespective of the mileage. As long as the payments made by employers for business use of employees’ own cars and vans do not exceed these limits, the payments are “approved mileage allowance payments” and do not have to be reported as a benefit. Employees who are paid less than 45p per business mile may also claim Mileage Allowance Relief up to the new limit.
Use of the approved mileage rate is being extended to volunteer drivers if they keep records to show that no taxable profit has been made. The passenger payments allowance, which already applies to employees, is also being extended to volunteer workers. Volunteers carrying passengers as part of their volunteering duties will be allowed to use the passenger payments allowance of 5p per mile per passenger. The use of these provisions by volunteer drivers is not set in legislation and will be covered by HMRC guidance.
The source legislation for mileage allowance payments has already been changed to give effect to the increase to 45p from 6 April 2011. This change is notable because it is the first statutory instrument for which a Tax Information and Impact Note (TIIN) has been prepared under new procedures introduced by the Government for undertaking impact assessments for changes to direct taxes, including income tax and NICs.