The recent deadline for self-assessment tax has come and gone, prompting HMRC to diligently review taxpayers’ submissions for accuracy and timeliness.
While this scrutiny is necessary, it is high time for HMRC to heed its own guidance and revise its outdated mileage rates, which have remained unchanged for 15 years. During this period, the cost of living has significantly risen, with essentials like food, energy, rent, and mortgages all seeing price hikes. The expenses associated with running a car have also increased, impacting millions of individuals who depend on their vehicles for work.
Since 2010, petrol prices have surged by 15%, car insurance costs have escalated by 56%, road tax has jumped by 39%, and repair and maintenance expenses have climbed by 40%. Despite these mounting costs, HMRC’s mileage rate has remained stagnant, placing a financial burden on working individuals. This issue extends beyond the self-employed to employees who receive mileage reimbursements from their employers.
These circumstances result in workers effectively bearing the costs of performing their job duties, driving their real wages below the National Living Wage and deeper into a cost-of-living crisis. This situation essentially imposes a hidden tax on those who are diligently complying with regulations, often leaving them financially disadvantaged by thousands of pounds.
Recognizing this disparity, health unions have successfully negotiated fairer reimbursement rates for NHS staff like community midwives and occupational therapists, currently set at 56p per mile compared to HMRC’s rate of 45p. They continue to advocate for rates that accurately reflect the true expenses of car ownership.
However, for workers outside the NHS, such as home care staff, the situation is even more challenging. Many of these workers earn at or slightly above the National Living Wage but are reimbursed approximately a quarter less than NHS staff and about a third less than the actual cost of driving.
Research conducted by Unison and the RAC Foundation reveals that the genuine cost of work-related driving is closer to 67p per mile. Although HMRC suggests that taxpayers calculate their own expenses, the majority of employers rely on the official rate, resulting in millions of workers losing out on fair reimbursement.
The Conservative government allowed this inequity to persist for 14 years. Working individuals are not seeking preferential treatment but rather fairness in their compensation.
As a party that champions the interests of working people, Labour is urging the Government to direct HMRC to update the mileage rate promptly, demonstrating support for the working population.