If you use your own car for work and claim mileage, you'll know the current approved rate of 45p per mile has been stuck at the same level since 2011. The government has now announced a formal review of Approved Mileage Allowance Payment (AMAP) rates, with changes expected to be announced at a future Budget.
The Chancellor acknowledged earlier this year that the rates hadn't kept pace with the real cost of motoring, and that low-paid workers in sectors like home care have been effectively subsidising their own work travel as a result.
💸 How Far Behind Are the Rates?
The numbers tell a clear story. Motoring costs have risen by almost 60% over the last decade, including a 220% increase in tax and insurance costs. Using the Bank of England's inflation calculator, the current 45p rate would need to be around 67p per mile today to match what it was worth in 2011.
For anyone doing a significant number of business miles each year, that gap adds up to a real and growing cost.
👥 Who Does This Affect?
AMAP rates apply in two main situations:
- Self-employed sole traders who use their own vehicle for business travel and claim mileage as an allowable expense
- Employees (including company directors) who use their personal vehicle for work and are reimbursed by their employer
The current rates are 45p per mile for the first 10,000 miles and 25p per mile after that. Employers can pay up to these rates tax-free. Anything above them becomes a taxable benefit.
⏳ When Will Rates Change?
The government has said rates will be reviewed ahead of a future Budget, but no specific date has been given. The review will focus on workers who rely on their car for their job, and the government has committed to meeting with people who have been affected to inform the process.
The Association of Taxation Technicians (ATT) has welcomed the review but noted it doesn't go far enough to help those already out of pocket. They've called for similar reviews of other frozen reliefs, including the annual staff party exemption and the tax-free working from home allowance for employees.
✅ Action Points
- If you're self-employed and claim mileage, make sure you're keeping accurate mileage records now (date, destination, purpose and miles travelled)
- If you're an employer reimbursing employees for business travel, check your current policy and rates
- If you're being reimbursed at less than 45p per mile by your employer, you may be able to claim the shortfall as a Mileage Allowance Relief deduction on your tax return
- Watch this space for Budget announcements on revised rates
If you're not sure whether you're claiming mileage correctly or maximising your allowable expenses, your Client Manager can help. Get in touch and we'll make sure you're not leaving money on the table.