Author: Andre Spiteri
Phishing scams are on the rise, and small businesses are bearing the brunt it. A Federation of Small Business survey found UK SMEs suffer seven million cyber-attacks a year at a cost of £5.26 billion. And the vast majority of these attacks — 89 percent — are phishing scams.
UK drivers spend a lot of time on the road. According to the latest government statistics, British vehicles rack up 324 billion miles a year.
Luckily, if the drive is for business purposes, you can claim tax back from HMRC. With this in mind, here’s a definitive look at the UK’s business mileage-allowance rates for 2019. We’ll also show you how to calculate your mileage deduction.
What are the business mileage rates for 2019 in the UK?
The latest business mileage rates, or Approved Mileage Allowance Payments (AMAP) are:
|Type of Vehicle||First 10,000 Miles||Above 10,000 Miles|
|Cars and Vans||45p||25p|
You can also claim an extra 5p per mile if you have a passenger with you on a business drive.
The rates apply for any business journeys you make between 6 April 2018 and 5 April 2019. They’re identical to the rates that applied during 2017-18. In fact, the last time AMAP rates changed was in April 2012, when the AMAP rate for the first 10,000 car and van miles rose from 40p per mile to 45p per mile.
Who can claim tax back on business mileage using the AMAP rates?
You can claim a business mileage allowance using AMAP rates if you:
- Are employed or self-employed (this holds true whether you’re a sole trader, a partner in a partnership or do business as a limited liability company). If your employer pays your business mileage costs but the amount is lower than the AMAP rate, you can claim tax back on the difference
- Use your personal car for business-related travel (company cars have different rules, which we’ll deal with in a minute)
- Haven’t claimed any capital allowances on your vehicle
- Claim your business mileage deduction using AMAP rates every year. You can switch to a different method only if you get a new car.
A journey counts as business travel if:
- You have to go somewhere other than your usual workplace to do your job, for example, because you’re meeting a client at their office
- Driving is part of your day-to-day duties, for example, because you’re a bus driver.
The following DO NOT count as business journeys:
- Travelling to a location that’s close to your workplace. So, if a client’s office is next door to yours, driving from home to the client’s office wouldn’t count as a business journey
- Trips in which your main purpose isn’t work-related
- And no, you can’t turn a personal trip into a business journey by stopping to run a work-related errand on the way.
With that out of the way, let’s take a more in-depth look at AMAP rates.
What do the AMAP rates cover?
AMAP rates cover the cost of running and maintaining your vehicle. This includes:
- Fuel, servicing and maintenance (including your MOT) and any repairs
- Car insurance
- Road tax (vehicle excise duty, or VED)
- Wear and tear.
AMAP rates DON’T cover:
- Motorway tolls
- Parking fees
- Congestion charges
- Other incidental expenses.
You can claim tax back on these expenses in addition to the AMAP rate if you can show you’ve made them ‘wholly and exclusively’ for business purposes. This means:
- You incurred the expense purely for business reasons. This would apply if you had to pay for parking when visiting a client’s office
- There is some personal use, but you can show you used a ‘definite proportion’ of the expense ‘wholly and exclusively’ for business purposes. So, if you were in a client meeting for 3 hours then went to Starbucks for a natter with a friend, you could claim only the first 3 hours of parking
How to calculate your business mileage deduction: Example 1
Once you have this information in hand, calculating your business mileage deduction is very straightforward.
Let’s say you’re self-employed. Your total taxable profit (your income after deducting allowable expenses) is £40,000.
You’ve travelled 14,000 miles by car. 3,000 were personal journeys and the remaining 11,000 were business-related.
So, you’d calculate your mileage deduction as follows:
- Multiply the first 10,000 by the current AMAP rate of 45p. This gives you £4,500
- Multiply the remaining 1,000 by the current AMAP rate of 25p. This gives you £250
- Add £4,500 and £250 to get the total of £4,750
- Deduct £4,750 from your total taxable profit. This means you’ll pay tax only on £35,250
How to calculate your business mileage deduction: Example 2
Now, let’s say you’re an employee. You’ve racked up 10,000 in business mileage on your personal car. Your boss reimburses you at a rate of 35p per mile.
In this case, you can claim tax back on the difference, which is 10p per mile.
This means you can deduct £1,000 from your taxes (10,000 multiplied by 10p).
How do I claim my mileage deduction?
Claiming your mileage deduction is easy. If you’re self-employed, include the mileage deduction in your self assessment tax return. If you’re employed, you can claim using Form P87. Do note, however, that you’ll have to file a self assessment tax return if you’re claiming more than £2,500.
What if I drive a company car?
HMRC’s business mileage rates don’t apply to company cars. A company car is a vehicle that:
- Belongs to your employer (or, if you’re self-employed, to your limited liability company)
- You take home with you
- You use for both business and personal journeys.
HMRC considers a company car to be a benefit-in-kind. This means you can’t claim a mileage deduction on your tax return. Instead, you actually pay tax on the car.
How much tax do I pay on a company car?
The amount of tax you pay on your company car depends on:
- The car’s taxable value. This is also known as the P11D value, and you can calculate it using HMRC’s company car and car fuel benefit calculator
- Carbon dioxide emissions (CO2)
- Engine type (whether it’s petrol, diesel, hybrid or electric)
- Which income tax bracket you fit into
The company car tax rates (also known as BiK rates) for 2018-19 are:
|CO2 Emissions||% of P11D - Petrol||% of P11D - Diesel|
|0 - 50||13||16|
|51 - 75||16||19|
|76 - 94||19||22|
|95 - 99||20||23|
|100 - 104||21||24|
|105 - 109||22||25|
|110 - 114||23||26|
|115 - 119||24||27|
|120 - 124||25||28|
|125 - 129||26||29|
|130 - 134||27||30|
|135 - 139||28||31|
|140 - 144||29||32|
|145 - 149||30||33|
|150 - 154||31||34|
|155 - 159||32||35|
|160 - 164||33||36|
|165 - 169||34||37|
|170 - 174||35||37|
|175 - 179||36||37|
Paying Tax on a Company Car: Example
Let’s say your boss gives you a company car with a P11D value of £15,000. It has a petrol engine and emits 75 grams of CO2 per kilometre. You pay tax at the basic rate of 20 percent.
To find out the tax due, you’d do the following:
- Multiply the car’s P11D value by the BiK rate
- In this case, you’d multiply £15,000 by 16 percent (since the car has a petrol engine and emits 75 grams of CO2 per kilometre)
- This would give you £2,400
- Your highest rate of income tax is 20 percent, so you’d pay only 20 percent of £2,400, that is £480.
So can’t I claim any of my company car expenses?
Well, yes you can. While you can’t use AMAP rates, you can claim tax back on the fuel you burn on business journeys using HMRC’s advisory fuel rates.
HMRC updates the advisory fuel rates every quarter. However, you can use the old rates for up to a month after they’re updated.
The latest advisory fuel rates, which kicked in on 1 December 2018, are:
Advisory Fuel Rates for Petrol
|Engine Size||Petrol - amount per mile|
|1400cc or less||12 pence|
|1401cc to 2000cc||15 pence|
|Over 2000cc||22 pence|
Advisory Rates for Diesel
|Engine Size||Diesel - amount per mile|
|1600cc or less||10 pence|
|1601cc to 2000cc||12 pence|
|Over 2000cc||14 pence|
These are treated the same as vehicles with petrol or diesel engines
4p per mile
How do I claim tax back using advisory fuel rates?
To claim tax back on your company car fuel using advisory fuel rates you must:
- Pay all fuel costs out of your own pocket
- If your boss (or your limited liability company) pays your fuel costs, but the rate is less than the advisory fuel rate, you can claim tax back on the difference.
Claiming tax back on fuel: Example 1
As with claiming tax back on business mileage using the AMAP rates, claiming tax back on fuel using advisory fuel rates is fairly straightforward.
Let’s say you have a Vauxhall Corsa with a 1.4 petrol engine. You rack up 13,000 miles, of which 10,000 are business miles and the rest are personal journeys.
Based on the latest fuel advisory rates, you could claim 10,000 miles at 12p per mile, that is £1,200.
Claiming tax back on fuel: Example 2
Now, let’s say your boss reimburses you for fuel at a rate of 6p per mile. This means you can claim tax back at a rate of 6p per mile, that is £600.
And don’t forget to keep detailed records of your mileage. You never know when HMRC will ask to see them!
Here’s a look at the new UK income tax rates for 2019-20. We’ll also explain how these changes will affect your tax bill.
How are income tax rates changing in 2019-20?
The government announces changes to income tax in the autumn budget. The most significant changes announced in the latest one — the Autumn Budget 2018 — were:
- A higher tax-free personal allowance threshold
- An increase to the ‘higher rate’ income tax threshold
- Changes to the National Insurance lower and higher earnings limits
- A temporary increase in the Annual Investment Allowance for the next two years.
What are the UK income tax rates and brackets for 2019-20?
The new income tax rates and thresholds for 2019-20 are:
|Tax Rate (Band)||Taxable Income||Tax Rate|
|Personal allowance||Up to £12,500||0%|
|Basic rate||£12,501 to £50,000||20%|
|Higher rate||£50,001 to £150,000||40%|
|Additional rate||Over £150,000||45%|
This means that the minimum income you have to earn in a year to start paying tax in the UK will now be £12,500. Similarly, the basic tax rate of 20 percent, which currently applies if you earn up to £46,350 a year, has been extended.
The government planned to make these increases in 2020-21, but decided to put them in place a year earlier. Chancellor Philip Hammond explained that the decision was a result of “the improvements we have delivered in the public finances.”
On the downside, the income tax thresholds will stay the same in 2020-21. The next revisions are planned for 2021-22, when the thresholds will increase in line with inflation.
The new rates apply only in England, Wales and Northern Ireland. Scotland sets its own income tax rates and thresholds.
We’ll deal with Scotland’s income tax rates for 2019-20 in a minute. First, let’s have a look at how your tax bill will change as from 6 April 2019 if you live in another part of the UK.
What are the current 2018-19 income tax rates and thresholds?
The current tax brackets in England, Wales and Northern Ireland are:
|Tax Rate (Band)||Taxable Income||Tax Rate|
|Personal allowance||Up to £11,850||0%|
|Basic rate||£11,851 to £46,350||20%|
|Higher rate||£46,351 to £150,000||40%|
|Additional rate||Over £150,000||45%|
So how does this compare with the income tax rates that’ll kick in on 6 April 2019?
- You’ll be getting an additional £650 a year, tax-free
- You’ll pay the basic rate of tax, that is 20 percent, on an additional £3,000 a year
- If you’re on a low income, you’ll pay less tax
- If you’re a higher earner, you’ll also pay less tax.
All in all, the government reckons 32 million people will have a lower tax bill as a result of these changes. Pretty good right?
Let’s crunch some numbers so you can get a better idea.
Example 1: How much tax will I pay in 2019-20?
Let’s say you’re a sole trader. Your total income after deducting allowable expenses is £20,000 a year
Here’s how much tax you’d pay under the current income tax rules and how much you’ll pay in 2019-20.
Under the current thresholds:
- £11,850 is tax-free
- This leaves you with a taxable income of £8,150, which falls within the basic rate threshold
- So, your total tax liability would be 20 percent of £8,150, that is £1,630.
Under the income tax thresholds for 2019-20:
- £12,500 is tax-free
- This means your taxable income would be £7,500
- At the basic rate of 20 percent, your total tax liability would be £1,500.
This means you’ll be getting an extra £130 a year in your pocket in 2019-20.
Example 2: How much tax will I pay in 2019-20?
Now, let’s say your income after deducting allowable expenses is £50,000.
Under the current income tax rates:
- £11,850 is tax-free
- This leaves you with a taxable income of £38,150, of which:
- £34,500 falls within the basic rate and is taxed at 20 percent
- The remaining £3,650 falls within the higher rate and is taxed at 40 percent
- So, your total tax liability would be (34500 x 20%) + (3650 x 40%), that is £8,360.
Under the income tax thresholds for 2019-20:
- £12,500 is tax free
- This means your total taxable income is £37,500
- Since the basic rate threshold has gone up, all of your taxable income falls within the basic rate of 20 percent
- So, you’d pay 20 percent of £37,500 in tax, which amounts to £7,500.
That’s £860 less than you’d pay this year.
What are the new income tax rates and brackets if I live in Scotland?
As we explained above, Scotland’s tax rates and thresholds are slightly different to the rest of the UK. The following table shows the income tax rates for 2019-20:
|Band||Taxable Income||Sottish Tax Rate|
|Personal Allowance||Up to £12,500||0%|
|Starter Rate||£12,500 to £14,549||19%|
|Basic Rate||£14,549 to £24,944||20%|
|Intermediate Rate||£24,944 to £43,430||21%|
|Higher Rate||£43,431 to £150,000||41%|
|Top Rate||over £150,000||46%|
If you make more than £100,000 a year, your personal allowance goes down by £1 for every £2 you make. So, if you earn £101,000 a year, your tax-free personal allowance would go down by £250, making it £12,250.
How have Scottish income tax rates changed from 2018-19?
The main changes to the Scottish income tax rates in 2019-20 are:
- As in the rest of the UK, the tax-free personal allowance has gone up to £12,500 — a £650 a year increase over the current personal allowance
- The starter rate threshold has gone up from £13,850 in 2018-19 to £14,549 in 2019-20
- The basic rate threshold has also gone up, from £24,000 in 2018-19 to £24,944 in 2019-20.
How do the new Scottish income tax rates compare to the rates and brackets for the rest of the UK?
The main difference between Scotland’s income tax rates and those in the rest of the UK is that Scotland has five tax bands to the rest of the UK’s three.
The end result of this difference is that higher-income earners pay more tax in Scotland than they do in the rest of the UK. By contrast, Scottish lower-income earners pay less tax.
Example 3: How much tax does a low-income earner pay in Scotland?
In our first example above, an income of £20,000 a year in 2019-20 would result in a tax bill of £1,500 if you live in England, Wales or Northern Ireland.
By contrast, under the Scottish tax system you’d pay tax as follows:
- £12,500 would be tax-free
- Of the £7,500 of your taxable income:
- £2,049 would be taxed at the starter rate of 19 percent
- £5,451 would be taxed at the basic rate of 20 percent
- So, your total tax liability would be (2049 x 19%) + (5451 x 20%), that is £1479.51.
This is £20.49 a year less tax than you’d pay in England, Wales or Northern Ireland.
Example 4: How much tax does a high-income earner pay in Scotland?
In our second example, an income of £50,000 a year would result in a tax liability of £7,500 in 2019-20.
By contrast, in Scotland:
- £12,500 would be tax-free
- You’d have to pay tax on the remaining £37,500 as follows:
- 19 percent on £2,049
- 20 percent on £10,395
- 21 percent on £18,486
- 41 percent on £6,570
- This means your total tax bill would be £9,044.07.
That’s £1544.07 more than you’d pay in England, Wales or Northern Ireland.
What about National Insurance thresholds?
Like income tax rates, National Insurance thresholds are also changing as from 6 April 2019. And this will affect the way you calculate your tax return.
Here’s a look at the new National Insurance thresholds and rates for employees and the self-employed and how they compare with 2018-19 rates.
How National Insurance will change for employees:
|Rate||2019-20 Threshold||2018-19 Threshold|
|12%||£8,632 to £50,000||£8,424 to £46,384|
|2%||Over £50,000||Over £46,384|
If you’re a higher-income earner, the widening of the National Insurance threshold means you’ll pay more NI in 2019-20. And this might eat up some of the savings you’ll make on income tax.
Case in point, if you have a yearly salary of £50,000, you’ll pay £4,964.16. This is a £336.64 increase over your 2018-19 tax bill.
That said, seeing as you’ll save £860 on income tax, you’ll still be better off.
How National Insurance will change for the self-employed:
|Type||2019-20 Rate||2018/19 Rate|
|Class 2||£3.00 per week||£2.95 per week|
|Class 4||9% on profits between £8,632 to £50,000||9% on profits between £8,424 to £46,350|
|Class 4||2% on profits over £50,000||2% on profits over £46,350|
The government recently announced it has decided to scrap plans to abolish Class 2 National Insurance. Instead, 2019-20 will see it rise by 5p a week.
The government has also adjusted the Class 4 National Insurance thresholds to bring them in line with the new income tax bands.
What about the increase in the annual investment allowance?
Revised income tax and National Insurance rates aside, the government has also increased the Annual Investment Allowance from £200,000 to £1 million.
The increase is temporary. It’ll only last for two years, after which the Annual Investment Allowance will go back down to £200,000. So if you were thinking of making a big investment to help your business grow, now’s the time to do it.
And there you have it. That’s a rundown of the most important income tax changes you should know about as we approach the 2019-20 tax year.
Here’s to a successful 2019.
One in which you reach new heights and, hopefully, pay less tax.