Bicycle mileage allowance : all you need to know
With fuel costs rising and a greater awareness of the health benefits of cycling, more people in the UK are turning to bicycles as a means of transport. Alongside the use of fully-electric vehicles, cycling is seen as cost-effective and environmentally-friendly. In addition, it is a healthy way to travel on a daily basis. More and more cities are creating or adapting the existing road infrastructure to ensure cycling becomes safer for all road users.
Cycle to Work initiative
Almost twenty years ago, the Government launched its Cycle to Work initiative, to help cut congestion, reduce the load on public transport, make an impact on the environment and improve people’s health. In recent years, particularly during the COVID-19 pandemic, enthusiasm for the scheme and for cycling, in general, has boomed.
In July 2020, the Government issued a note on cycle infrastructure design, providing guidance to local authorities on delivering high-quality cycle infrastructure including information on cycle parking, traffic signs and road markings and junctions and crossings.
Cycling is often seen as being an answer to air pollution and congestion in cities. It is also increasingly recognised as a great form of exercise, particularly for the heart, lungs and legs.
Employers are also seeing the benefits, both fiscal and health-related, of encouraging their employees to cycle to work and during the course of their duties.
Mileage allowance payments
HMRC sets “mileage allowance payments” (MAPs) which aim to compensate employees for the use of their own personal vehicle (car, motorbike, bicycle) during working time.
The MAP is a tax relief allowance which basically covers the cost of fuel, insurance, road tax and general wear and tear on an employee’s personal vehicle when they use it in the course of their work. A maximum amount is set by HMRC that a business or self-employed individual can claim per mile.
Employers in the UK are not obliged to pay a mileage allowance to their employees, but many now choose to incorporate this into their travel policy. As long as the payment is equal to or under the HMRC-approved mileage rates, it does not need to be reported to the HMRC and is not subject to tax. If an employer pays more than the approved mileage allowance payment (MAP), then the excess is considered to be a “personal benefit” to the employee and tax has to be paid on it. Anything above the approved amount must be reported to the HMRC and included in the company’s tax returns.
The approved amounts depend on the type of vehicle used (car, van, motorbike, bicycle) and the distance travelled. It applies only to employees using their own vehicles (not company-owned vehicles) and may include interest on any loan to buy their vehicle. They do not apply to road tolls or parking charges and the standard rules for tax deductions apply.
Mileage allowance payments must be made directly to the employee (not to a third party).
HMRC publishes tables of approved mileage rates depending on the type of vehicle and the number of miles covered.
|2012 onwards||First 10,000 business miles in the tax year||Each business mile over 10,000 in the tax year|
|Cars and vans||45p||25p|
Bicycles and MAPs
It may seem strange that mileage allowance rates apply to bicycles since they do not require any fuel in the conventional sense. However, the mileage allowance payment is intended not only to cover the price of fuel but also the costs of maintaining the vehicle, which increase with mileage. A bicycle that is used for regular journeys will need repairs, new tyres, and regular servicing to keep it in a safe, roadworthy condition. The mileage allowance payments apply to all types of bicycles, whether manual or electric-assisted.
Calculating the MAP is very simple. The number of miles travelled is multiplied by the mileage rate for the relevant vehicle. For example, if you travel 250 miles in a year using your bicycle for business, the MAP would be 250 x 0.20 = £50.
If an employer is paying employees a mileage allowance for using their own bicycle, they may also be able to reclaim the VAT on the employees’ mileage expenses.
The journeys that mileage allowance payments can be claimed for must be “wholly and exclusively” for the purposes of business. Whether this is a regular, frequent, or occasional journey taken by bicycle, MAPs apply.
These journeys include travelling from one office or worksite to another and travelling to a temporary location to conduct necessary business. This can include visiting suppliers, meeting with clients, and attending conferences or training sessions.
The types of journeys that MAPs cannot be claimed for include any travel for personal reasons, the usual commute to and from the workplace, and travelling to a location that is very close by, such as a neighbouring site accessible on foot.
Other tax benefits of cycling
Since its launch more than twenty years ago, the Government’s Cycle to Work scheme has gained in popularity. Through the scheme, employees give up part of their salary in exchange for a bicycle and equipment provided by their employer, which is free of any tax. They also pay less tax and National Insurance contributions and the employer also makes savings.
In order to qualify for the scheme, the employee must not have ownership over the bicycle (it is effectively leased from the employer), the bicycle must be used for at least 50% of the time for ‘qualifying journeys’, i.e. to or from the workplace or in the course of work, and the offer must be available to the entire workforce.
While cycling cannot of course replace all business-related journeys, especially long-distance ones or journeys where supplies or equipment need to be transported, bicycles can feasibly be used for short distances between workplaces or from a train station to the office, for example. Employees and employers can benefit financially from the various schemes in place and employees’ health can improve as well. It’s a win-win situation!
Do you want to find an easier way to record, track and reimburse your employees’ business related cycle journeys? Do you want to make it easier for your staff to make expenses claims? Do you want to get rid of the need to collect paper receipts and invoices from your staff? Mooncard Mobility fuel card may be just the solution you are looking for.
Get in touch for a no-strings-attached demo and a tailor-made quote corresponding to your business needs.