Friday 5th September 2008 Blog

Getting More out of Mileage Rates

Last month we reminded you about tax and NI free mileage rates for clients using their car for business journeys. However, questions about mileage are still very topical given recent rises in running costs. How can your clients maximise a tax-free payment from their company?

When your clients’ employee takes colleagues on business trips in their vehicle, they can be paid up to 5p per passenger mile without deduction of tax and NI, provided the passenger is also using it for business purposes. This effectively extends the current tax and NI free mileage rate to 45p and 30p respectively on journeys with one passenger; 50p and 35p on journeys with two passengers, and so on. However, the additional passenger rate of 5p must be paid to them; it's not something they can later claim through their tax return.

More significantly, your client might just not realise how many business errands they and their family run, during a tax year...

- Who picks your clients customers up from the railway station?

- How many times have they called for a lift after a late night function?

- And what about the last minute dashes to: the bank to pay in cheques; get something urgent in the post; or collect cheques from late payers rather than have them say "it's in the post".

Small amounts of mileage claimed from the company can add up to large amounts that are tax and NI free.

For 2008/9 why not get your clients company to pay out a lump sum now, to cover their mileage for the whole tax year. For example, if their anticipated business mileage for 2008/9 is 2,500 miles then they could take a lump sum of £1,000 (2,500 miles x 40p per mile). They then keep a note of the mileage as they go along, settling up with the company before the tax-year end with a balancing payment or refund. A simple way of proving the mileage between two points is to use one of the route planners available on the internet. In fact this is the method a tax inspector would use if he was checking mileage claims.
 

Posted by: Bookcert Mentoring Team

Friday 5th September 2008

Click here to return to the Blog menu.