The proposed pay per mile car tax system could have a quite a big impact on UK drivers including employees who use their own car for work purposes.
Using a car for business purposes isn’t an option for many employees who have to use their own vehicles to perform their duties of employment (not normal commuting).
The full implications on how a pay per mile car tax system would work haven’t been confirmed yet by the government however an increase in car tax costs wouldn’t be welcomed by many individuals who don’t have any choice other than to drive substantial mileage to do their job.
A survey undertaken by Gocompare.com revealed that out of 2000 drivers 26% thought that people who use their own car for business should be either exempt or get a discounted charge with nearly 52% feeling like the scheme could be unfair to those who have to drive more.
One of the reasons a pay per mile version of road tax is being considered by the government is to make up for reduced car tax income caused by the introduction of electric vehicles.
Electric vehicles currently incur no car tax (vehicle excise duty) but this will change from April 2025 when a new electric vehicle road tax will become a reality for hundreds of thousands of EV drivers including those who have EV’s as a company car benefit in kind.
In the survey by Gocompare almost 52% of people think that the new scheme could make road tax too complicated with 42% questioning how efficiently the scheme could be enforced.
These are valid concerns which Chancellor Reeves may provide motorists more details on in Labours Autumn Statement which is expected to be on 30 October 2024.
Could the mileage allowance be increased?
Many employees who use their cars for work purposes can claim back a mileage allowance from HMRC which is meant to help cover the extra car costs involved.
HMRC allows a claim of .45p per mile for the first 10,000 miles and .25p per mile which are known as AMAP rates.
The current AMAP rates remain unchanged since 2011 which is an area that the government could look at for improvement to help employed taxpayers using personal vehicles for work-related travel.
An increase in the mileage rates that can be claimed back from HMRC could provide some relief for drivers who use their own cars for business and face a higher road tax cost.
It’s not just employed taxpayers that could be affected with self employed individuals who claim for work related mileage potentially experiencing higher road tax costs as well.
In a similar way to their employed counterparts self employed people can reduce their taxable income by claiming back tax relief on their qualifying work related journeys via their self assessment tax return.
