The recent self-assessment tax deadline has come and gone, prompting HMRC to review tax returns for accuracy and timeliness.
It is now imperative for the tax authority to heed its own advice and revise outdated mileage rates that have remained unchanged for 15 years. During this period, the cost of living has significantly risen, impacting essentials like food, energy, rent, and mortgages, as well as the expenses of maintaining a vehicle. This fixed mileage rate disproportionately affects individuals who depend on their cars for work.
Since 2010, petrol prices have surged by 15%, car insurance costs have increased by 56%, road tax has seen a 39% uptick, and repairs and maintenance expenses have risen by 40%. However, HMRC’s mileage rate has remained stagnant, creating a financial burden for individuals, including both self-employed workers and employees receiving mileage reimbursements from their employers.
This situation results in an indirect tax on workers, reducing their real wages below the National Living Wage and exacerbating the overall cost-of-living pressures. Various health unions have successfully negotiated fairer reimbursement rates for specific professions, such as NHS staff, who currently receive 56p per mile compared to HMRC’s 45p rate.
For workers outside the NHS, such as home care staff, the discrepancy is even more pronounced, with reimbursements falling below the true cost of operating a vehicle. Research conducted by Unison and the RAC Foundation indicates that the actual cost of driving for work is closer to 67p per mile, significantly higher than the HMRC rate.
While HMRC suggests that taxpayers calculate their individual costs, the reality is that most employers rely on the official rate, leading to millions of workers being shortchanged. This issue has persisted for 14 years under the Conservative government, highlighting the need for fairness rather than preferential treatment.
Labour advocates for working people and urges the government to direct HMRC to update the mileage rate promptly, demonstrating support for the workforce’s financial well-being.