Mileage Rates

The use of Mileage Rates can be a much more tax efficient alternative to the business owning the Car or Van.

Edward Lowe Accountants will calculate the benefit of either options and advise on which is the best alternative for your business.

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Where an employee uses his own vehicle for business mileage he can be paid a mileage rate by his employer at the following rates without any liability to tax. Should the employer pay a rate at less than the amount shown a tax relief claim can be made by the employee to have the difference offset against his income before income tax is charged. Edward Lowe Accountants can make this claim on your behalf.

Miles 2017/2018 2016/2017
Up to 10,000 miles 45p 45p
Over 10,000 miles  25p 25p
For each additional passenger 5p. Motorcycles 24p. Bicycles 20p.




Where an employer provides a company car, but the employee pays for the fuel, the employer may pay a mileage allowance for business journeys. HMRC accepts payments not exceeding their published ‘advisory fuel rates’ (AFR’s) are reimbursements of expenses, not subject to income tax or Class 1 National Insurance contributions.

The ‘advisory fuel rates’ are now reviewed every three months, with the new rates taking effect from 1 March, 1 June, 1 September and 1 December. However, for administrative simplicity, employers have the option of continuing to use the old rates for up to one month.

These rates may also be used to reclaim input VAT in respect of fuel used for business journeys (receipt to cover the amount reclaimed are required).

The ‘advisory rates” are also used where the employer pays for all the fuel used for both business and private travel and the employee is required to reimburse the cost used for private journeys: the usual scale charge for private motoring is not avoided unless reimbursement is made at least the relevant ‘advisory rate’.

The advisory fuel rates’ scheme does not apply, in any circumstances, to business or private travel in a company-owned Van.

Hybrid cars are classed as either petrol or diesel cars for this purpose.

Cylinder Capacity Petrol Diesel LPG
0 – 1400 (1600 Diesel)cc 11p 9p 7p
1401 (1601 Diesel) – 2000cc  14p 11p 8p
2001cc+  22p 13p 13p

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