Approved Mileage Allowance Payments

Small petrol cars lose out for the first time

12 November 2010

Workers who use their small petrol cars on business now find themselves out of pocket when claiming the statutory mileage allowance, AA Motoring Costs 2010 reveal. For the first time, motoring costs for all ranges of petrol cars exceed the tax-free limit.

Up until this year, an employee could buy a new small petrol car, use it for work and claim back a realistic motoring cost for that vehicle without losing out. The problem may also aggravate the widespread shortage of volunteer drivers, who drive vulnerable patients to hospital appointments, deliver meals on wheels and other community services.

 If they decide that it's not worth carrying on, crucial community services become threatened Under the Approved Mileage Allowance Payments (AMAP) scheme, employees can claim up to 40p a mile for the first 10,000 miles of using their own cars on company business before being taxed.

Based on latest pump prices and an average mileage of 10,000, a small petrol car costs just over 42p a mile to run, a small family car more than 52p and around 61.5p for a large family car. These costs include insurance, depreciation, maintenance and other outlay required to put and keep a car on the road

The AMAP allowance remains adequate for a small diesel car with typical motoring costs of just under 39p a mile. A small family diesel costs 53p a mile to run and a large family one 59p a mile.

Comment

"This is yet another squeeze on the drivers' pocket, courtesy of more tax, higher fuel costs, dearer insurance and poorer second-hand values. With VAT rising 2.5% next year and fuel prices heading up, the strain will get worse," says Edmund King, the AA's president.

"Once the actual motoring cost tops the tax threshold and an employer agrees to pay it, an employee loses at least a fifth of the excess above 40p a mile to tax – leaving them out of pocket. If companies had to provide cars for these workers, the firms would no longer be insulated from the extra costs their employees are now having to bear.

"For volunteer drivers, who jeopardise the non-profit car-sharing status of their insurance if they claim above the tax threshold, the picture is even more gloomy. If they decide that it's not worth carrying on, crucial community services become threatened.

"Certainly, for good Samaritan drivers, there is a clear need to raise the tax threshold, particularly as there is no threat to Treasury income."

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10 November 2010