April 24 2014 Latest news:

People using their own cars for work could be missing out on their full mileage entitlement following the increase in mileage allowance payments, leaving them out of pocket.

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Although the increases came into effect in April, many people who use their own car for business travel have remained unaware their mileage allowance has been increased from 40p to 45p,

The mileage rate for business travel exceeding 10,000 miles remains at 25p per mile, but the change to the initial rate will affect hundreds of thousands of workers.

Michael Muskett, a senior partner with accountancy firm PKF, said he thought the mileage increase had gone largely unnoticed by many people.

“Whether it was lost in the range of national insurance, tax and pension changes which came into force on April 6 we can’t be sure, but the mileage rate increase still seems to be news to many business drivers and businesses,” said Mr Muskett.

“With fuel prices refusing to fall back following spiralling increases over the past few months, many motorists have been hit hard in the wallet.

“It seems strange they should be missing out on their extra entitlement.

“It is a matter for employers how much they pay their employees for the business use of a private car.

“But employees reimbursed less than the HM Revenue & Customs-approved 45p per business mile by their employer may claim mileage allowance relief up to the new limit from HMRC.

“Employees will need to ensure they keep accurate mileage records for any claims.”

For example, if an employee drives 3,000 business miles in 2011-12 and receives 40p per mile from his or her employer, he or she is entitled to claim a reduction in taxable income of £150.

Volunteers carrying passengers as part of their volunteering duties will also be allowed to use the passenger payments allowance of 5p per mile per passenger.

This allowance already exists for employees. For people with company cars who receive a car fuel benefit, the base cost to which the relevant benefit percentage is applied increases by £800 to £18,800 for 2011-12.

Mr Muskett said: “This latest increase means that the tax cost of getting free private fuel from an employer can often outweigh the fuel cost savings, so employees should do their sums before deciding whether to take advantage of this benefit.”

From April 2012, there will be increases in the taxable benefit arising in respect of company cars with carbon dioxide emissions of between 100 and 225g/km.

Further changes to the system are planned from April 2013.

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