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Business mileage allowance increased
Chartered accountancy firm Watson Buckle are advising that the mileage allowance for employees who use their own cars for business use has been increased.
As of 6 April 2011, employees can now claim 45p per mile for the first 10,000 miles of business use, up from the previous 40p. The 25p per mile rate which applies to additional business miles per year is unchanged.
Employees using their own cars are able to claim business mileage costs back from their employers using the approved mileage allowance rates (AMAPs), so that the amounts reimbursed are not treated as a taxable benefit.
If the employer pays at a rate below the AMAP limit, the employee can claim a deduction for the shortfall, known as mileage allowance relief, from their taxable income.
John Kinsella, partner at Watson Buckle, said: “Because some employers may not be able to adjust their internal expenses systems in time to allow for the new 45p rate, many people may continue to receive the old 40p rate for a period, meaning they may be eligible to claim mileage allowance relief.
“Volunteers can also use the AMAPs rates when claiming back motoring costs from voluntary organisations, provided they do not make a profit by doing so. They will also be able to claim the additional allowance of 5p per mile, per passenger, which is currently available to employees taking colleagues on a business journey”.
Turning to the calculation of taxable benefits of using company cars, the Government is also increasing the percentage rates applicable to the car price by one per cent for all vehicles with carbon emissions between 130g/km and 220g/km. The percentage rates vary for cars emitting different levels of CO2.
Measures announced in the 2010 Budget that the taxable benefit-in-kind for using company vehicles that do not emit any CO2 at all or those that emit 75g/km or less remain unchanged, with a zero benefit for electric cars and a new five per cent rate for calculating the benefit of using a car emitting 75g/km or less.
As first revealed in 2009’s Pre-Budget Report, the 10 per cent band will be extended to include company cars with CO2 emissions of up to 95g/km from 6 April 2012. The threshold was originally 99g/km, but this figure has now been reduced to fit in with the new threshold announced in this 2011’s Budget. From 2012, the benefit taxable on employees for company cars and the Class 1A NIC charge on employers for cars with these emission levels will be calculated at 10 per cent of the list price. The calculation rate will increase from 10 per cent by a percentage point with every increase of 5g/km CO2 of emissions.
As of 6 April 2011, the taxable benefit for employees who receive free fuel for private use of a company car has also increased. The set figure to which the percentage based on the vehicle’s CO2 emissions is applied has gone up from £18,000 to £18,800.
This increase, coupled with the new 50 per cent top marginal rate of Income Tax, may mean a tax charge of £3,290 on private fuel for those driving cars with highest emissions.
For more information, contact Watson Buckle on 01274 516700 or visit www.watsonbuckle.co.uk
