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Per day and mileage allowance: declaration of taxes and exemptions

Carol Bernard

Management ofper day and mileage allowance usually leads to complications for companies. If you have any doubts as to which travelling expenses are exempt from taxes and which are not, or how to fill in a tax return, please read this article.


An employee who holds a travelling appointment can deduct all of their business travelling expenses as travel in the performance of the duties of the employment, even where the journey starts from home.

There is little guidance in case law about what constitutes a travelling appointment but a commercial traveller can be said to be typical. A commercial traveller is travelling on his or her work, as distinct from travelling to it, from the moment of leaving home. Another example is a service engineer who moves about from place to place during the day carrying out repairs to domestic appliances at clients’ premises.

CompanyMileage allowance: declaration of taxes and exemptions

The company don’t need to report or pay tax if the employee earned at a rate of less than £8,500 in the tax.

The company will be exempt from reporting or paying any tax for all employees and directors if the cost is for:

  • a works bus service
  • anemployee with a disability (but only in certain circumstances)
  • a taxi home after occasional and irregular late-night working
  • a taxi home if a car-sharing system is temporarily unavailable
  • bicycles or cycle safety equipment
  • travelling to work because public transport has been disrupted by industrial action

Declaring per diem and mileage allowances.

The company must report the employees’ travel to HM Revenue and Customs (unless it’s exempt). They may have to deduct or pay tax and National Insurance on it.

For employees earning at a rate of less than £8,500 a year the company should:

  • report on form P9D

For employees earning at a rate of £8,500 or more a year, or for directors, the company should:

  • report on form P11D
  • pay Class 1A National Insurance on the value of the benefit

If the employee arranges it and the company pay the supplier directly, the company add the cost of the transport to the employee’s other earnings and deduct and pay Class 1 National Insurance (but not PAYE tax) through payroll. But if the employee arranges and pays for the transport, and the company reimburse them, the company has to add it to the employee’s other earnings and deduct and pay PAYE tax and Class 1 National Insurance through payroll.

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