Business cycling mileage

Does your employer pay car mileage but not cycle mileage? Did you know that the same rules that make it easy for businesses to pay car mileage expenses also cover cycle mileage?

HMRC rules

Her Majesty’s Revenue and Customs (HMRC) allows companies to pay cycle mileage tax-free, and NI-free, up to 20p per mile (2016-17 tax year). This must be mileage for business trips or to a temporary workplace, not ordinary commuting to a permanent place of work.

You might wonder what this payment is intended to cover, as cycling doesn’t consume fuel. However, car mileage is also tax-free at an amount far higher than purely the cost of fuel: a mileage payment is also intended to cover the incremental costs of running a car, such as maintenance, which increase with mileage. The rate is the same whether your cycle is manual or electric-assisted.

In order for payments for mileage to be tax-free, records of mileage should be kept, as for car mileage.

Note that you cannot claim the mileage tax-free if you are using a cycle through a Cycle To Work scheme, unless ownership has been transferred to you, as the bike is owned by the company during the loan period and therefore is not personal transport.

Benefits for business

Paying cycle mileage is likely to be cheaper than expenses payments for alternative forms of travel. While most people are unlikely to replace a 100-mile cross-country trip in a car with one by bicycle, they might cycle to a railway station rather than taking a taxi, or claiming car mileage and parking costs. Businesses with clients or multiple sites in a smaller area could see gains in switching employees to cycling.

Offering cycle mileage is one way to encourage employees to spend less on travelling, while also supporting employee choice and health, and demonstrating environmental credentials.

Tax relief

If your employer doesn’t pay cycle mileage, or pays at a rate below 20p per mile, you can still claim tax relief on 20p less what you were paid, per mile. The amount of tax relief is likely to be small unless you do a great deal of cycling for business trips, but if you fill in a tax return and keep records anyway, you might as well.

Hester Wells

Please refer to HMRC or your accountant or finance department for further information and clarification.