Business Services, Business Tax, Personal Taxation

Mileage rates make business use of personally owned cars unviable

By RJP LLP

Mileage rates make business use of personally owned cars unviable

My most recent visit to the petrol station really highlighted just how much fuel costs have increased in recent months – filing up my car cost double what it did three years ago. Inflation is now running at a 40-year high, but unlike prices for most goods and services, tax allowances set by HMRC have typically stayed the same for many years.

One of the most long-standing official rates is the 45p mileage rate, which has been unchanged for over a decade. When it was first set in 2011 it was probably a fair level of remuneration for the first 10,000 business miles travelled in a personally owned car in a tax year. It is now probably costing employees more in fuel than can be reimbursed for tax free, bearing in mind the rate is supposed to also cover the cost of the appropriate wear and tear of the vehicle.

The accountancy industry is currently calling for the mileage rate to be increased to 90p per mile during the current cost of living crisis, which seems a fair adjustment. This frozen allowance is catching a lot of taxpayers out. Due to the increased cost of company car ownership, many people have opted to use their own personal vehicle for work purposes and be reimbursed for mileage. Now they are finding themselves out of pocket.

It is possible for employers to voluntarily increase the mileage rate beyond 45p to counter this increased cost, but this is treated as a taxable benefit in kind, which further disadvantages the employee. It is also more complicated to administer. Experts are arguing the fairest way forward would be for the government to increase the tax free mileage allowance rate so that it is ‘tax neutral’ for employers and employees. This would mean increased costs for businesses, but since the additional expense is tax deductible, the net effect could be nil. They argue this is a better approach than cutting fuel duty, because it would support those who are specifically affected rather than represent a blanket increase.

Mileage rates are not the only reason why taxpayers are finding themselves out of pocket due to tax policies, read our other blog about the impact of frozen income tax thresholds.

If you would like to discuss ways you or your business can save tax, please contact us via partners@rjp.co.uk

How to get onboard with RJP

Talk to us

Have an initial discussion with a member of the RJP team to identify ways we can enhance your business's growth with our comprehensive support and strategic advice.

Hassle-free migration

Choose RJP and we'll smoothly manage all transitions, handling paperwork, coordinating with your current accountant, and ensuring no deadlines are missed for a worry-free experience.

A pathway to growth

Finally, we will send you the required documents to sign and return, leaving you to continue leading your business, backed by our abundant, responsive advice and support.

2024 Budget in depth – Key changes to capital gains tax

Business Services, Business Tax, Personal Taxation

Budget 2024 In depth – Inheritance tax changes

Business Services, Business Tax, Personal tax

Budget 2024 – What are the new tax rules for non-doms?

Personal tax, Probate and Inheritance Tax

Here’s what our clients have to say

Hear directly from our clients about how RJP's personal, straightforward approach has made all the difference in their business and personal success.

"I just wanted to drop you a short note to say how grateful I am for the support that RJP has provided over the past 4 weeks while our Financial Controller was away. I struggle to comprehend how much work your staff get through during their weekly visits and they are always a pleasure to have around the office."

"I wanted to write and express our gratitude for your help and hard work in getting Probate through and settling all the taxes. I am so pleased that we selected RJP, as your professional help and updates throughout this process have been invaluable. If at any time in the future Probate assessment may be needed, you will be our first port of call. Once again, many thanks to the whole team."

"I would like to take this opportunity to thank you very much for the amazing job you have done navigating us through this whole process. My family and I also really appreciate the care and compassion demonstrated by you and your team in every dealing. Our thanks to everyone."

"Just a quick e-mail from me to thank you for achieving the target for producing the draft accounts – it is very much appreciated and gives a first class impression of your firm. Many thanks."

"RJP provide our company with a complete service which takes the stress and strain away from the day to day running of our accounts! Their understanding of our business and their patience and advice is invaluable."

Get the latest tax tips to your inbox every month

FAQs

At RJP, we understand that keeping a finger on the pulse of your business's health is crucial. That's why we offer management reporting services—think of them as a regular health check for your company. These insights show you the real-time performance of your business, helping you make informed decisions to nurture and grow your enterprise.

We love seeing your business flourish! Growth and improvement are at the heart of our practical advice. From the ins and outs of everyday operations to big-picture strategic moves, we're here to offer clear, actionable steps that can propel your business forward.

We know dealing with the issue of compliance and auditing can be less than thrilling. That's exactly why we're here—to handle the complex stuff so you don't have to. We offer comprehensive compliance services, ensuring everything is up-to-date without you having to wade through a sea of regulations.

Absolutely! There's a world of opportunity out there to support your business financially, and we're well-equipped to be your guide. We can help you understand and access HMRC’s tax relief schemes that are relevant to you and your business, making sure you're not missing out on any potential benefits.

When you need us, we're just a call or an email away—no question is too small or too large. We're known for our quick responses and our fixed fees mean you can reach out without worrying about unexpected costs. Plus, we always keep things simple and straight to the point. We're not just your accountants; we're part of your team, ready to support both your business and personal needs.