EIM71160 - Volunteer drivers’ guidance: miles you can drive before tax is due

The tax-free mileage allowances change once you have travelled 10,000 miles. Many organisations pay the same amount of mileage allowance, no matter how many miles a volunteer driver travels. Even if you drive more than 10,000 miles you may still not make a profit because, although the rate of allowances you receive may be more than the tax-free allowance for travel over 10,000 miles, you may receive less than the tax-free allowance for travel up to 10,000 miles. If total mileage exceeds these limits, there could be a profit.

How do I calculate any profit?

Step 1

Add up all the mileage allowance payments you have received from the organisation(s) you drove for as a volunteer in the tax year.

Step 2

Determine the total mileage you have travelled for the organisation(s) in the tax year.

Step 3

Look up the tax-free mileage allowance rates. If you travelled more than 10,000 miles you need both figures of the tax-free allowance.

Step 4

Multiply the higher rate figure by 10,000 or your total mileage if it is lower. Multiply the lower rate figure by any miles in excess of 10,000. Add together the 2 answers.

Step 5

Compare this figure with the total mileage allowance payments you received (step 1). If the figure in step 1 is the smaller of the two, you have not made a profit. If the figure in step 1 is bigger than the figure in step 4 then the difference between the two is the profit you have made.

Example

In the tax year 2017 to 2018, Richard drives 16,000 miles for a charity which pays him 42 pence a mile. He receives £6,720 from the charity (16,000 miles at 42 pence).

Step 1

Richard has received £6,720 mileage allowance payments from the charity.

Step 2

Richard’s total mileage travelled for the charity of 16,000 miles.

Step 3

The tax-free allowance is 45 pence a mile for the first 10,000 miles, and 25 pence for miles over 10,000.

Step 4

Richard multiplies the 45 pence (higher rate) figure by 10,000 giving a figure of £4,500. He then multiplies the 25 pence (lower rate) figure by 6,000 (the excess over 10,000) and adds the result of 1,500 to the £4,500. Together the 2 amounts produce an amount Richard can receive free of tax of £6,000.

Step 5

Richard compares the £6,720 he received in mileage allowances (step 1) with the figure at step 4 of £6,000. He deducts £6,000 from £6,720 giving a profit figure of £720.