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HMRC internal manual

National Insurance Manual

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HM Revenue & Customs
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Class 1 NICs: Expenses and allowances: Mileage allowances: Rules before 6 April 2002: Calculating Class 1 NICs on mileage allowances - examples

Example 1 – employer’s mileage rate is below the authorised rate

An employee is required to travel from Newcastle to York to attend a business meeting.The employee undertakes a round trip of 160 miles in his own car and is reimbursed by hisemployer at 30p a mile. The Inland Revenue’s Authorised Mileage Rate (AMR) for a carof the type used is 45p.

As the employer’s mileage rate is below the AMR, no NICs are due.

Example 2 – employer’s mileage rate is above the authorised rate

An employee is required to travel from Newcastle to York to attend a business meeting.The employee undertakes a round trip of 160 miles in his own car and is reimbursed by hisemployer at £0.50 a mile. The AMR for a car of the type used is £0.45.

As the employer’s mileage rate is higher than the AMR, NICs are due on the excess. Inthis case NICs are due on £8.00 ((£0.50 – £0.45 = £0.05) x 160).

Example 3 – employee travels in excess of 4,000 miles in the year.

An employee travels 500 business miles per month in his own car. The employerreimburses the employee £0.40 a mile. The AMR for the employee’s car is £0.45 forthe first 4,000 miles and £0.25 for each mile travelled thereafter. By the end of month 9the employee has undertaken 4,500 miles. The employer reimburses the employee £200.00 inmonth 9 for that month’s mileage (500 x £0.40).

As the employer’s mileage rate is no higher than the AMR for up to 4,000 miles, noNICs are due, see NIM05715. This is because, for NICs, the‘up to 4,000 mile’ rate is used irrespective of the number of business milestravelled.