Chancellor Rachel Reeves is expected to announce a rise in mileage rates today, it has been reported. The Labour Party Chancellor plans to change the 45p HMRC mileage charge for drivers from Thursday.
Changes to the 45p per mile rule
According to Politico, Ms Reeves will change the 45p a mile that employers pay employees in expenses for using their car for business travel. Dan Bloom, from Politico, explained: "They haven’t been lifted for 15 years. It's been a big union ask."
At Treasury questions in parliament earlier in March, there was a heated contribution from the MP for Oldham, with Treasury minister Dan Tomlinson acknowledging changes were "well overdue."
Current mileage rates
For the first 10,000 business miles in the tax year, cars and vans can get 45p, while motorcycles get 24p and bikes 20p. For each business mile over 10,000, cars and vans get 25p, motorcycles 24p and bicycles 20p.
MP Jim McMahon said: "The 45p a mile rate, set 15 years ago, is nowhere near the true cost of running a vehicle today, which was recently assessed at 67p a mile, and that was before fuel costs rocketed in the last week."
Impact on workers
McMahon gave an example of the 15-year-old rate affecting his constituent. He said: "Gemma, a social worker for over two decades, travels around 400 miles a month for work, which means she is paying over £1,000 a year just to do her job and care for other people."
In response, the chancellor said: "I recognise that motoring costs have evolved significantly, and it is an important issue for many people who claim motoring expenses. We are, therefore, looking at the issue and will consider the matter further in the usual way, as part of a future fiscal event."
"We have a standard Treasury policy of keeping all taxes under review… but as I say, this is one area that I will be keeping a very close interest in," Ms Reeves said.
Treasury minister Dan Tomlinson told MPs "a review is well overdue" because "mileage rates have been unchanged since 2011 and that has increased the cost of working."
Jon Stride, chair of the ATT’s technical steering group, said: "These rates are now so out of date that employees using their own vehicle for work are effectively out of pocket. What’s more, if an employer chooses to pay higher mileage rates which better reflect the cost to their employee of running a vehicle, this creates tax and national insurance implications for both the employee and employer."
