Understand Motoring Expenditure and NIC Refunds

Accountants Chester – Tax Tip No. 60

If your Chester-based business has employees who use their personal cars for work, understanding mileage allowances and reimbursements is important. Here’s the key information:

• • Tax-Free Mileage: Employees can receive tax-free allowances for business miles driven in their own car. This is currently 45p per mile for the first 10,000 business miles in the tax year, dropping to 25p per mile thereafter.
  • National Insurance (NI): NI rules are similar, but calculated differently. You can disregard an amount for NI purposes based on 45p per mile for all business mileage driven within an earnings period.
  • Recent Changes: A tribunal decision expanded the definition of what counts as car-related expenses for NI purposes. This means car allowances may now be partially disregarded for NI calculations, potentially resulting in lower NI contributions.

What This Means for Chester Businesses

• • Potential NI Refunds: If you’ve paid NI on employee car allowances, you might be due a refund. Review your records carefully using the 45p per mile rule.

How to Claim a Refund

• • Via RTI: Submit claims through Real Time Information.
  • In Writing: Contact HMRC with employee details, NI numbers, mileage records, allowance amounts, and the NI contributions you want to reclaim.

Accountants Chester can provide essential advice on car allowances and help you navigate any potential NI refund claims.