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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15977
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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We pay employees a car allowance. What rates should we pay

Customer Question

We pay employees a car allowance.
What rates should we pay for business mileage ?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

You can pay any rate you like but the maximum that can be paid to an employee tax free is set out here.

The average rate of mileage allowance paid to employees by employersusing their own car for business travel is 15p to 20p per mile. If you pay your employees, say 15p per business mile, they can claim tax relief on the difference between the maximums and what you pay them. for example, if one of your employees did 10,000 business miles in a tax year and you paid him £1,500, he could claim tax relief on a further £3,000 which is worth £600 to a basic rate taxpayer and £1,200 to a 40% taxpayer.

I hope this helps but let me know if you have any further questions.