Excess mileage payments

Newsletter issue – June 2023

Petrol and diesel pump prices are high, but the tax-free mileage rates (see table) payable to employees who use their own vehicles on business haven‘t been adjusted for over a decade.

Vehicle	First 10,000 miles per year	Above 10,000 miles per year
Cars and vans	45p	25p
Motorcycles	24p	24p

Many employees just can‘t afford to use their own car or motorbike for business journeys if they only get reimbursed at these rates, so some employers pay more. But any excess above the tax-free rate is taxable, and subject to NIC.

If you have paid your employees higher mileage rates than in the table above, you need to treat those excess amounts as extra salary and put them through the payroll. You also need to communicate this treatment to the affected employees.

Where the employee‘s own car is purely electric you can still pay up to the rates in the above table for business journeys, tax and NIC-free.

Where the employee charges their private electric car at a charging point at work for free, there is no taxable benefit for the employee on using that electricity. Things get more complicated if you reimburse your employee for the cost of charging their private electric car at their home, or at a road-side charging point.