Grey fleet drivers are being left out of pocket on mileage reclaims because the tax-free amount they can receive in recompense has not changed for more than a decade.

The approved mileage allowance payments (AMAPs) set by HMRC haven’t changed since 2011 despite the soaring cost of motoring

Currently, the approved mileage allowance payments (AMAPs) set by HMRC allow workers to receive a tax-free figure of up to 45p per mile from their employer on the first 10,000 miles per year which they drive in their own car or van.

But this figure hasn’t changed since 2011 despite the soaring cost of motoring.

And now the RAC Foundation is calling for a big hike in the AMAP figure.

It’s citing figures from the Office for National Statistics (ONS), which reveal the cost of motoring in April 2023 was 41% higher than in April 2011.

The RAC Foundation is therefore arguing that people who drive their own cars for work should now be entitled to about 63p per mile tax-free.

Further calculations show just how much grey fleet drivers are currently losing out. Someone covering 5,000 miles a year for work in their own car would currently receive £2,250 but would receive up to £3,150 before facing a tax liability if the hike in the cost of motoring was factored into the AMAP. That’s a current loss of £900 annually.

The ONS’s cost of motoring number is derived by taking the price of the different elements of motoring expenditure from within the overall ‘basket of goods’ it monitors, and combining them together in the proportions spent on each on average.

Looking individually at the different cost of motoring categories as identified by the ONS shows just how much motorists have been hit over the last 12 years. Tax and insurance has risen 183%, maintenance has gone up 48%, purchase costs have risen 16% and fuel has increased by 12%.

The research by the RAC Foundation was carried out to help inform a report by the union UNISON into the impact of the rate freeze on front-line public service workers.

Steve Gooding, director of the RAC Foundation, said: “We know that some of our most important workers – those employed in health and social services, and in supporting roles, often working outside ‘normal’ office hours -– need to drive their cars for work but are being left out of pocket by the failure of ministers to sanction an uplift in the amount per mile they can receive tax-free for getting around to do their job.

“These aren’t board members and well-paid executives in new saloons but key workers in 5- to 10-year-old cars who can ill-afford to be subsidising the rest of us for the cost of carrying out their critical roles.”

The RAC Foundation is calling for an urgent review of the mileage rate and regular reviews thereafter.

“Tax cuts might be off the Prime Minister’s agenda for the time being, but surely fair tax treatment for these key workers should be a significant concern for the Chancellor in the face of a recognised cost-of-living squeeze,” Gooding added.

Under the AMAP rates, companies can pay their employees anything they like when reimbursing them for driving for work in their own cars – but any amount over 45p per mile, for the first 10,000 miles is currently taxed. Over 10,000 miles, the tax-free amount per mile falls to 25p.