Given current economic conditions, it will come as no surprise that there’s a lot of discussion around the current HMRC advisory mileage rate of 45p.
In fact, there’s a petition to increase the HMRC mileage rate from 45p per mile to 60p per mile. Whether they will get the required 100,000 signatures to get a government response will be interested to see.
But, as it stands today, the mileage rate is set at 45p. But when did mileage allowance increase to 45p, and does that historical increase offer any hope for an increase this year?
Here’s what has happened in the past…
When did mileage rate change to 45p? The mileage allowance increased to 45 pence on the 6th of April 2011, coming into effect for the tax year 2011/2012. The 45p mile was introduced as part of The Approved Mileage Allowance Payments (Rates) Regulations 2011.
A section from the government document read as follows:
In the “Rate per mile” column of the table in section 230(2) of the Income Tax (Earnings and Pensions) Act 2003 (the approved amount for mileage allowance payments) for “40p” substitute “45p”.
When did mileage allowance increase to 45p?
HMRC mileage rate for reimbursing the use of private cars (e.g., for employees but also volunteers) has been the same fixed figure of 45p/mile (up to 10,000 miles) since 2011.
The lack of any increase since then is a serious disincentive to volunteer drivers particularly as fuel has gone up again recently.
Since 2011, there has been an increase in inflation; it has gone up by over 25%. On top of that, the cost of petrol and diesel has also gone up by 20% since 2017.
The petition to raise the 45p mileage allowance made the following statement:
Volunteer car drivers who did so much during Covid, and still do, to get people to healthcare settings, e.g., hospitals, vaccination centres, and to deliver shopping and prescriptions, are not being compensated fairly for the use of their cars. Consequently, charities are struggling to recruit new volunteer drivers. These drivers help free up hospital beds and keep people independent and in their own homes.
When does 45p mileage rate start?
As explained above, the 45p mileage rate started in 2011. But, if you mean the threshold, then the mileage rate starts from 0 miles. Once you reach 10,000 miles in a tax year, every mile after that has a rate of 25p.
Approved mileage rates are set by HMRC and reviewed from time to time. The approved mileage rate is set to cover the use of personal car fuel, wear and tear, insurance, and repairs.
The current rate of 45p is set from the tax year 2011/2012 when the average fuel cost was £126.5p per litre – seems low now doesn’t it?
There seems to be little evidence that this is going to be reviewed soon even though the average price per litre of fuel has increased by 40% since the last update to the approved mileage rate.
| First 10,000 miles | Above 10,000 miles | |
| Cars and vans | 45p | 25p |
| Motorcycles | 24p | 24p |
| Bikes | 20p | 20p |
Conclusion
As of today, there are no signs that the government is planning on implementing an HMRC mileage rate increase from 45p.
However, the pressure is likely to increase as the cost of living goes up and fuel prices rise.
You might also like…
- How to reduce benefits in kind / tax on a company car
- How you can claim back VAT on mileage allowance
Jon has been in business since 1999, and in that time worked with more than 300 small business clients. As well as being an accountant, he is also an early adopter of tech, and has helped small businesses to leverage the power of their computer systems by creating software to automate and simplify accounting tasks.
