Tax and National Insurance on mileage expenses

The way in which income tax and National Insurance are calculated on car mileage expenses changed with effect from 6 April 2002.

Her Majesty's Revenue and Customs (HMRC) has revised the system in the hope that it will encourage people to use smaller, cleaner cars for business journeys.

Irrespective of the engine size of your car, income tax will be due on all business mileage in excess of 40 pence per mile on the first 10,000 miles travelled in the financial year and 25 pence per mile thereafter. This will be reflected in the tax codes issued by HMRC in the following tax year.

However, in the case of National Insurance contributions, the profit element is calculated at the time of payment and is shown seperately as Travel-NI'able' on your payslip.

Although the HMRC has introduced the new single rate for the profit calculation, we will still pay the appropriate national rate for the cubic capacity(cc's) of the vehicle as shown elsewhere in this section.

End of year information - Form P11D
Form P11D shows the profit or allowance on your mileage payment. You need to keep this form safe as you will need it for completing your tax return (if you receive one). P11D's are issued in June of each year.