Business mileage rates simplified

CHANCELLOR Brown also addressed the issue of reimbursing employees for using their own cars on business – and flagged up further changes in the future. The two lower bands will be abolished and replaced with a fixed rate of 40 pence per mile for the first 4,000 miles.

Brown said: 'To provide an early incentive to use cleaner cars for business trips, drivers of small cars will benefit from an increase in the current two lower bands to 40 pence for the first 4,000 miles and 25 pence for further miles from April 2001. The rates for the two higher bands will be frozen.

For the second stage of reform, the Government will be consulting with interested parties on the introduction of a new statutory system of mileage rates from April 2002. The proposed statutory system will provide a greater incentive to drive cleaner vehicles for business trips by offering a single, tax and National Insurance free, rate of 40 pence per mile for the first 10,000 business miles per year for all sizes of car; and a single lower rate of 25 pence per mile for any additional business miles above the first 10,000.

And for the truly environmentally-minded commuter, the Chancellor incentivised alternative means of getting to work. He plans to increase the income tax and National Insurance free mileage rate employers can pay for cycle use for business trips to 20 pence per mile from April 2002; introduce a new passenger rate of 2 pence per mile per passenger to encourage car-sharing on business trips in private cars from April 2002 and lower the threshold for works buses qualifying for tax exemptions from 12 passenger seats to nine from April 2002 to assist and encourage employers in smaller companies to set up Travel Plans to help their employees to travel to work without using their cars.