We believe that MileIQ is the best way to track your mileage for taxes. But, we understand that some of you may want to look for MileIQ alternatives. Here are some of the other methods to track your mileage.
Author: Marin Perez
Hopefully, you know the tax implications of having employees use a personal car for business reasons. But, what happens if an employee carries another worker in a personal car for business journeys?
Let’s go over passenger payments on your tax bill.
What are passenger payments?
Businesses can pay traveling employees up to 5p per mile tax-free if the employee uses a personal car for business reasons and carries another employee in the car or van. This can be in addition to the Mileage Allowance payments.
Do businesses have to report passenger payments to the HMRC?
No. If you’re paying passenger payments, you don’t have to report it to the HMRC. You also don’t have to deduct taxes from this or pay National Insurance, either.
Do you have to pay more with multiple passengers?
There’s no law requiring you to pay more if an employee carries multiple other employees on business journeys.
Can I get mileage allowance relief?
No. The HMRC doesn’t provide an equivalent of the Mileage Allowance Relief. That is, you don’t get tax relief if you carry another employee and aren’t compensated.
Sometimes, employees use their personal cars for business reasons. There are potential tax implications for this scenario. Let’s go over the business mileage rates when employees use their own vehicles.
What rules for taxes are there on mileage?
If a business makes payments to employees over a certain amount, they have to report it to the HMRC. The business has to deduct and pay tax on that based on business mileage rates.
How much can businesses pay employees for business mileage?
A business can pay employees for the business use of their personal vehicle. This is called a Mileage Allowance Payment. A business can pay up to an approved amount before having to report them to the tax agency.
What’s the approved amount before businesses have to report?
To determine the approved amount, you’ll need to know the employee’s business miles for the year. Then, multiply it by the appropriate business mileage tax rate.
What are the business mileage tax rates?
|Type of Vehicle||First 10,000 Miles||Above 10,000 Miles|
|Cars and Vans||45p||25p|
For example: Let’s say an employee drives 13,000 business miles in their car. The approved amount for the year would be £5,250 (10,000 x 45p plus 3,000 x 25p).
What do businesses have to report regarding mileage payments?
A business must report paid amounts over the approved amount. Add this to the employee’s pay and then deduct and pay tax as you normally would.
If your payment is below the approved amount, a business doesn’t have to pay tax. The employee will then be eligible for a Mileage Allowance Relief on their taxes.
What records do I need to keep?
You don’t need a record of your employee business miles when you file or pay taxes. But, you will need those records for audits, both financial and from the HMRC. That’s why it’s a good idea to use a mileage-tracking solution like MileIQ to have compliant mileage logs.