Section E - Mileage Allowance (Privately owned cars)

General and background information – Mileage Allowance for Private cars

HMRC publish a set of tables for approved mileage allowances for business mileage incurred in a privately owned vehicle.

Payments up to these limits are deemed to be tax free and do not need to be reported on the P11D Form. Only the excess has to be reported.

HMRC accepts that mileage allowances paid to employees, using their own privately own vehicles for business purposes, within the set limits attract no tax liability. This is because the rates are set to cover the full costs of running a privately owned vehicle e.g. petrol, servicing, insurance, road tax, depreciation etc.

If an employee is paid at or below the set rates then there is no tax for them to pay on the receipt of the mileage allowance. However if the employee is paid less than their set limit per mile, they can claim tax relief on the difference between what they have been paid by their employer and what they could have received from the set rates. In these circumstances you can use the P11D Organiser to prepare a Business Mileage Claim form on behalf of your employee.

However if the employee receives more than the set rate for their own car, HMRC deem a profit to have been made by the employee, and will seek to tax that profit & it is this profit that has to be returned on the P11D. 

P11D FORM: Section E

P11D (Guide)  Section E

Mileage allowance payments

Enter the figure over and above the approved amount for each payment which is exempt from tax.

The approved amount is the number of business miles travelled (other than as a passenger) multiplied by the appropriate rates for the kind of vehicle used. These are shown in the table below.

Approved mileage allowance payments can only be made for travel in the employee’s own vehicle.

Read chapter 16 of booklet 480 - an expenses and benefits guide for further information. 

Additional HMRC Documentation and external help

Click the links below to go directly to the HMRC website to download or view the PDF or help files listed below.

• HMRC P11D Guide
• HMRC Booklet 480 (Chapter 6)  
• HMRC P11D Working Sheet 6

Managing Mileage Payments (where NOT processed in external systems)

Should employees be paid at a different rate to the approved HMRC mileage AMAP rates for using privately owned cars for business mileage, the P11D Organiser can be used to create and calculated mileage records and then compare the values derived to the HMRC approved rates https://www.gov.uk/expenses-and-benefits-business-travel-mileage/rules-for-tax 

A benefit in kind value arises where the amount of money received is in excess of the approved rates and the "profit" element should be declared to HMRC. Where mileage payments are made at less than the approved rates, this would leave the employee at a loss and therefore able to claim the underpaid value as tax relief from HMRC under Section 231 ITEPA 2003.

Managing Mileage Payments (where processed by external system)

If you do not wish to use the P11D Organiser to essentially emulate the mileage scheme(s) in operation within your organisation, simply use the more straightforward method detailed in the help article - Section E - Managing Mileage Payments (where processed in external systems)