2. Rules for tax
If you make payments to employees above a certain amount, you’ll have to report them to HM Revenue and Customs (HMRC) and deduct and pay tax.
Mileage Allowance Payments
Mileage Allowance Payments (MAPs) are what you pay your employee for using their own vehicle for business journeys.
You’re allowed to pay your employee a certain amount of MAPs each year without having to report them to HMRC. This is called an ‘approved amount’.
Work out the value
To calculate the ‘approved amount’, multiply your employee’s business travel miles for the year by the rate per mile for their vehicle.
Use HMRC’s MAPs working sheet if you need help.
Tax: rates per business mile
|Type of vehicle||First 10,000 miles||Above 10,000 miles|
|Cars and vans||45p (40p before 2011 to 2012)||25p|
Your employee travels 12,000 business miles in their car - the approved amount for the year would be £5,000 (10,000 x 45p plus 2,000 x 25p).
It doesn’t matter if your employee uses more than one vehicle in a year - it’s all calculated together.
What to report and pay
Anything above the ‘approved amount’
- report on form P11D
- add anything above the ‘approved amount’ to the employee’s pay, and deduct and pay tax as normal
Anything below the ‘approved amount’
You won’t have to report to HMRC or pay tax, but:
- your employee will be able to get tax relief (called Mileage Allowance Relief, or MAR) on the unused balance of the approved amount
- you can make separate optional reports to HMRC of any such unused balances under a scheme called the Mileage Allowance Relief Optional Reporting Scheme (MARORS) - contact HMRC to join the scheme