The approved maximum tax and national insurance free mileage allowances for employees using their own cars for business are as follows:

First 10,000 Miles: 40p
Miles over 10,000: 25p

Income Tax and NICs are due when allowances exceed these rates. Employees can claim tax relief on any shortfall.

Rates of up to 5p per mile, per passenger, are also tax and NIC free when paid for the carriage of fellow employees on the same business trip.

These rates supercede the Fixed Profit Car Scheme, details of which we include below.

Fixed Profit Car Scheme
Under the Fixed Profit Car Scheme (FPCS) the maximum tax free mileage allowances for employees using their own cars for business are as follows:

2001/02 2000/01
First 4,000 business miles Business miles over 4,000 First 4,000 business miles Business miles over 4,000
Engine Capacity
Up to 1000cc 40p 25p 28p 17p
1001cc - 1500cc 40p 25p 35p 20p
1500 - 2000cc 45p 25p 45p 25p
Over 2000cc 63p 36p 63p 36p
Flat rate 42.5p 25p 40p 22.5p

Notes

Payments in excess of FPCS rates – excess is taxable. Payments at less than FPCS rates - employees can claim tax relief for shortfall. Employees can also claim tax relief for some of their interest paid on a loan to buy a car used for business.

The National Insurance Contributions Office use the FPCS mileage rates for up to 4,000 miles. If the employer's mileage rate is above these rates, there will be a NIC liability on the excess.