Freezing tax-free mileage means drivers will soon have to pay to work
Mileage allowances cover vehicle costs such as fuel, vehicle maintenance, depreciation, insurance and road tax. But the cost of refueling a car now covers almost the entire mileage rate.
The fuel cost of an Audi S8 is 40p per mile before other costs are factored in, while a Land Rover Discovery is 33p per mile and a Mercedes S500 32p per mile.
In 2010, when the mileage rate was last revised, petrol prices were 38% lower than they are today – at £1.17 per liter compared to £1.90 per liter. Fuel costs for an Audi S8 would then have been 25p per mile.
Hugh Bladon of the Alliance of British Drivers said the mileage rate should increase depending on the price of fuel. He said: ‘Obviously it’s not enough for the costs. Obviously with the cost of fuel there should be an immediate adjustment – even if it was only 60p – people are suffering.
Civil servant Michael Turner*, 43, said he was now “undoubtedly” spending his own money commuting to work, spending around “£150-200 a month” on vehicle running costs.
He said: ‘You have to maintain the car, pay for petrol, pay more expensive commercial insurance and tax the car. You can’t make 45p go that far. The threshold is expected to increase by the same percentage as fuel has increased this year. At least 50pc, at 65 to 70p.”
Not all businesses take advantage of the maximum threshold – and most pay less than 45p per mile, leaving employees to claim the difference from HMRC.
Billy Edwards, 73, who runs a community care business in Somerset, said his business’s 35p a mile rate made him one of the most generous employers.
Rates for NHS workers differ slightly, with drivers able to claim 52 pence per mile for the first 3,000 miles driven in a year, after which the rate drops to 20 pence per mile.
Sam Wyman*, 37, a mental health crisis nurse from Hertfordshire, said: ‘We are logging double the mileage we were doing three or four years ago – around 500 miles a month – while a full load of petrol went from £70 to £110. I basically pay to work.
Employers can pay above the 45p threshold, but generally do not as this then makes the worker liable for income tax.
The AA’s Luke Bodset said the organization spent “two to three years” campaigning before the rate was initially raised from 40p to 45p in 2011. He said the rate should be reviewed at the fall when gasoline prices reach an expected plateau.
He said the threshold was ‘not matched’ to drivers’ maintenance costs, especially with older cars that drivers will need to replace. A Treasury spokesman said: ‘We are keeping all tax policy under review.