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HMRC internal manual

National Insurance Manual

Class 1 NICs: Expenses and allowances: Motoring expenses (including mileage allowances) paid on or after 6.4.02: Non motorised cycles

Employees using their privately owned cycles for business travel – Paragraph 7Bof Part 8 of Schedule 3 to the Social Security (Contributions) Regulations 2001 insertedby the Social Security (Contributions) (Amendment No 2) Regulations 2002 SI 2002 No.307


Some employers pay expenses to employees who use their own cycles for businesspurposes.

For the definition of a cycle, see section 192(1) of the Road Traffic Act 1988. Thedefinition refers to any bicycle, tricycle or cycle with four or more wheels that is not amotor vehicle.

Qualifying amounts free from liability for Class 1 NICs

Paragraph 7B allows for the disregard from earnings of the qualifying amount (QA) of amileage allowance payment (MAP) in respect of a cycle. There is no Class 1 NICs liabilityon the QA disregarded from earnings.

The approved mileage rate for cycles which is used to calculate the qualifying amount isprovided by section 230(2) ITEPA 2003. For a list of the approved mileage rates for thedifferent classes of vehicle including cycles, see EIM31240.

The meaning of “Mileage allowance payment” is in section 229(2) of ITEPA 2003,see EIM31210.

The method for calculating Class 1 NICs liability

To calculate the Class 1 NICs due on the mileage allowance payments paid to employeeswho use their own cycle for business travels follow the steps below.

Step 1

Identify the total amount of MAPs paid for the use of a privately owned cycle.

Step 2

Identify the QA. See NIM05830 which explains how to calculatethe QA.

Step 3

Calculate the excess of MAPs over the QA, if any.

Step 4

Add the excess to other earnings in the same earnings period the employer paid the MAPS.Calculate the Class 1 NICs due as normal.

Any amount by which QA exceeds RME is lost. It can neither be set against other earningsin the earnings period, nor carried forward to the next earnings period.