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To calculate the ‘approved amount’, multiply your employee’s business travel miles for the year by the rate per mile for their vehicle. Use HMRC’s MAPs working sheet if you need help.
As a car allowance is given to the employee to buy their own personal vehicle, they can claim a mileage allowance on top when using this car for work purposes. A car allowance can help to cover fuel costs in general but claiming a mileage allowance on top is good for business.
The mobile employees then get a car allowance in actual business mileage multiplied by the mileage rate. The amount is tax-free if it does not exceed the IRS standard mileage rate of 67 cents per mile for 2024.
1. Use the AAA gas map to calculate fuel costs for a car allowance. AAA Gas Prices has several useful tools to help you evaluate the sufficiency of your car allowance for particular parts of the country. The chief feature is the color-coded map of state average gas prices.
Car allowance is a stipend paid to an employee for vehicle use. On the other hand, mileage reimbursement is a per-mile rate multiplied by a set amount according to an employee’s work contract. Car allowances are almost always taxable, while mileage reimbursements, if equal to or less than the IRS standard rate of 62.5 cents per mile, are tax ...
Once you’ve set out the broad terms of your mileage reimbursement scheme, it’s important to tell your employees how their compensation will be calculated. Most companies use an approved per-mile rate from their national revenue agency, which takes into account all the costs involved in running a car - both fixed and variable.
Employer-provided vehicle. If you use a vehicle provided by your employer for business purposes, you can deduct your actual unreimbursed car expenses. You can’t use the standard mileage rate. See Vehicle Provided by Your Employer in chapter 6.
