Tax-free Mileage Allowance of 60p

The approved HMRC mileage allowance payment is a maximum of 45p per mile. This means that you can pay your directors and employees the maximum amount for using their own vehicles for business journeys.

You can also pay your employees more than the HMRC’s approved rates of 45p for the first 10,000 miles and 25p per mile thereafter. The excess amount might count as extra pay on which PAYE tax and National Insurance¬†is due. However, there is a way wherein you can pay higher rate tax and NI free.

If you are already paying the mileage allowance which is equal to or more than the approved mileage allowance, you can also pay the driver an extra 5p per mile for each passenger that your employee takes in the car. This also applies to vans.

The destination of the driver and the additional passengers does not have to be in the same place in order to have the extra 5p per mile allowance. The driver could drop off the additional passengers at different work sites en route to their final destination, even if this means detour and extra mileage.