CIOT: Increase in business mileage allowances welcome up to a point
Campaigners for people on low incomes have given a qualified welcome to today’s announcement of an increase in business mileage allowances.
It was announced in the Budget that business mileage allowances for employees will be increased from April 2011.
Currently, when employees use their car or van for business mileage, they can claim tax relief of 40 pence per mile for the first 10,000 miles reducing to 25 pence per mile thereafter. Those rates have remained fixed for many years, despite the escalating costs of fuel and, especially for young drivers, ever-increasing insurance premiums.
Robin Williamson, Technical Director of LITRG, said:
“The proposed increase to 45 pence per mile for the first 10,000 qualifying business miles does not reflect the real increases in motoring costs since 1997 when the current rates were set, but is welcome nonetheless.
“But the government could have gone further to encourage ‘greener’ mileage by extending the availability of relief for employees carrying passengers.
“Currently an employee does not have to pay tax where their employer pays an allowance of up to 5 pence per mile for each passenger sharing the journey with them. But where the employer chooses not to pay such a subsidy, unlike marginal allowance relief, the employee cannot claim tax relief themselves, so those with less generous employers lose out.”
The Chancellor did, however, announce that charities and other similar organisations engaging volunteers will also now be able to pay the 5 pence per mile per passenger rate. LITRG has welcomed this.
Notes to editors
The Low Incomes Tax Reform Group (LITRG) is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.
The CIOT is a charity and the leading professional body in the United Kingdom concerned solely with taxation. The CIOT’s primary purpose is to promote education and study of the administration and practice of taxation. One of the key aims is to achieve a better, more efficient, tax system for all affected by it – taxpayers, advisers and the authorities.
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George Crozier
External Relations Manager
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The Chartered Institute of Taxation
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The Association of Taxation Technicians
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