Mileage changes still fall short

While the decision to increase mileage rates has been very much welcomed, there are concerns that workers are still losing out after 15 years of frozen rates.

It’s been suggested that this rise does not fully reflect inflationary pressures since the rates were last reviewed in 2011, especially considering the rise in motoring costs over that time.

Increase in Approved Mileage Allowance Payments Rate

The Chancellor recently announced an increase in the Approved Mileage Allowance Payments (AMAPs) rate for cars and vans.

This will rise from 45p to 55p per mile for the first 10,000 business miles each tax year, backdated to April.

However, the 25p rate applying to business mileage above 10,000 miles will remain frozen, and there were no changes to the rates for motorcycles or bicycles.

A positive step, but rates still fall short

The car and van rates had remained unchanged for 15 years despite significant increases in fuel, insurance, servicing and vehicle ownership costs over that period.

The ATT says that while the increase is a positive step, the changes still fall short and is calling for a new higher rate to be kept under regular review to avoid another long wait for further increases.

Jon Stride, chair of the ATT’s Technical Steering Group, said, “The increase to 55p per mile is welcome and long overdue. Employees who use their own vehicles for work have spent years absorbing rising motoring costs while the tax-free mileage rates stood still.

“However, a 10p increase after 15 years still does not fully reflect how much costs have risen since 2011. Fuel prices, insurance premiums, servicing and vehicle prices have all increased significantly during that time. Had mileage rates increased in line with inflation, they would be 68p today, an increase of 23 pence.1

“It is particularly disappointing that the 25p rate for mileage over 10,000 miles has been left untouched. Those employees who drive the greatest distances for work are often the ones under the greatest financial pressure from rising motoring costs.

“The rationale for such a sharp reduction after 10,000 miles has always been questionable, and freezing that rate for another year risks continuing to leave many workers out of pocket.”

To find out more about contracting, please contact Jaime on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com.