Mileage rates need to be updated to better reflect today’s cost of running a vehicle

Recent data shows that workers are being left out of pocket when they use their own cars for business trips due to outdated mileage rates.

The Association of Taxation Technicians (ATT) highlights the fact that these rates have not been updated since 2011 and the government should look to increase them to more accurately reflect the cost of using a vehicle for business.

Employees can be reimbursed for business travel tax-free – provided that their employer uses HMRC approved rates. For employees using their own car or van for business travel, these rates are currently 45p per mile for the first 10,000 miles, and 25p per mile thereafter.

According to the Bank of England’s inflation calculator, this suggests that 45p in 2011 would be equivalent to 63p by August 2023.

Senga Prior, Chair of the ATT Technical Steering Group, commented, “Freezing mileage rates for the last 12 years means employees are no longer fairly compensated for the real expenses incurred during their business travel. This particularly affects those on low wages, such as care workers, who have no choice but to use their own cars for work.

“The current rates are severely outdated, meaning employees are bearing the financial burden of business travel on behalf of their employers.”

Employers do not have to use the approved HMRC rates, but paying higher amounts will cause tax issues for their employees. The NHS, and a number of local authorities, pay rates that vary from the HMRC rates.

Senga added, “Employers who opt to pay higher rates to better reflect the actual costs of motoring end up creating a tax liability for themselves and their employees.

“If the HMRC rates were updated more regularly – and set at a level that other Government departments and local authorities were prepared to accept – this would simplify the position for employees, introduce consistency between the private and public sector and reduce administration costs across Government.”

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