Where a cash allowance is offered in lieu of a company car and employees then use their own cars for business, a good number of them will not claim the Mileage Allowance Relief that is available to them.

You should be aware of this when you fill in your Self-Assessment tax return.

Mileage Allowance Relief allows employees to claim the difference between what they receive in business mileage or fuel costs from their employer and what is approved by HMRC.

The MAR rate is currently set at

45p for the first 10,000 business miles and
25p per business mile thereafter in the tax year.

And yes, that is the same as the AMAPs rate.

For example, 10,000 business miles compensated at 12p per mile by an employer will enable the employee to claim tax relief on the balance of 33ppm. For a 20% taxpayer this amounts to £660 a year – not an inconsiderable sum.

Jim Salkeld, owner of Premier Blue, is an expert in the field of car benefit schemes. He says;

“Although the MAR rates are the same as those used for AMAPs, the latter is not a relief but a limit to which an employer can pay for business miles without incurring tax or National Insurance Contributions.

“In other words, where AMAPs are paid in full as part of an Optimised Cash Scheme, there is no further relief available through MAR and employees do not have to worry about making annual claims.

“Of course, whether paying AMAPs or business fuel / mileage expenses it is essential that employers maintain proper records for both HMRC compliance and for employees to be able to claim MAR – this is something that we are more than happy to provide advice on.”