People who drive their own cars for work purposes are being short-changed because the tax-free amount they can receive in recompense has not changed for more than a decade.
Currently, the Treasury allows workers to get a tax-free amount of up to 45p per mile from their employer on the first 10,000 miles per year which they drive in their own car or van.
However, the so-called approved mileage allowance payment has not changed since 2011 despite big increases in the cost of motoring since then.
According to the Office for National Statistics (ONS) the cost of motoring in April 2023 was 41% higher than in April 2011.
Calculations by Dr Tim Chatterton at the RAC Foundation suggest, therefore, that people who drive their own cars for work should now be entitled to about 63p per mile tax free.
The research by the RAC Foundation was carried out to help inform a report by the union UNISON into the impact of the rate freeze on front line public service workers.
The ONS’s cost of motoring number is derived by taking the price of the different elements of motoring expenditure from within the overall ‘basket of goods’ it monitors, and combining them together in the proportions spent on each on average.
Looking individually at the different cost of motoring categories as identified by the ONS:
- ‘Tax and insurance’ has risen 183% over the given time period
- Maintenance has risen 48%
- Purchase costs have risen 16%
- ‘Petrol and oil’ (fuel) has risen by 12%
