If you’re looking to use Mileage Allowance Payments (MAPs) and want to pay your team the tax-free payments they’re entitled to, how does this work in practice?
Here are a few common questions we’ll be asked, with the answers you need to set your mind at rest:
1. “Does the £0.45 x mileage just get added to my employee’s normal payroll for month end?”
The mileage will be added to an expense report which will then be paid directly to your employee, along with all other expenses for that month. It’s not subject to PAYE, so it wouldn’t normally go through your payroll.
2. “If my employee doesn't sign up for tax relief, will what I pay them be taxed at the same rate as their other income?”
Your employee can only claim the tax relief if he/she is being paid less than £0.45 per mile. The tax relief would be claimed on the shortfall of the £0.45 that’s paid to them. In this scenario, we’d recommend that your employee registers for self assessment in advance of 5 April, ready to submit a tax return for the coming tax year. If you pay them more than £0.45 then they’ll be taxed at 12% (as it’s subject to National Insurance) of anything above the £0.45. This is done via a P11D form that shows HMRC all benefits this person has received.
3. “Could my employee provide receipts for their fuel as an alternative to using Tripcatcher and to avoid the admin (i.e. treat the mileage expense like any other expense)?”
Unfortunately, it’s not as simple as submitting receipts for fuel as you’d then also be paying for some of your employee’s personal travel – that would make it a benefit to your employee and would need to be reported on a P11D form. You’d then have the tricky job of working out how much of the fuel relates to business and how much relates to personal, a task which can get extremely messy. We’d always recommend sticking to mileage as the metric you record and measure business travel by. It’s straightforward, and using the Tripcatcher and Receipt Bank apps, it’s a piece of cake to do.
If you’d like to know more about mileage claims for your business, give us a call on 01454 300 999, or drop an email to [email protected]