Question to the HM Treasury:

To ask Her Majesty's Government, further to the answer by Baroness Penn on 4 July (HL Deb), whether they will increase the allowable mileage rate for employees using their own vehicles for business purposes from 45 pence per mile, given the increased cost of fuel.

The Government sets the Approved Mileage Allowance Payments (AMAP) rates to minimise administrative burdens. The AMAP rates aim to reflect running costs including fuel, servicing and depreciation. Depreciation is estimated to constitute the most significant proportion of the AMAP rates. Fuel costs only contribute to a fraction of the AMAP rates and not the total rate.

Employers are not required to use the AMAP rates. Instead, they can agree to reimburse the actual cost incurred, where individuals can provide evidence of the expenditure, without an Income Tax or National Insurance charge arising.

Alternatively, they can choose to pay a different mileage rate that is higher or lower than the AMAP rates. If an employee is paid less than the approved amount, they are allowed to claim Mileage Allowance Relief (MAR) from HMRC. However, if the payment exceeds the relevant AMAP rate, and this results in a profit for the individual, they will be liable to pay Income Tax and National Insurance contributions on the difference.

As with all taxes and allowances, the Government keeps the AMAP rates under review and any changes are considered by the Chancellor.