Monday September 1st 2025
Midlothian House
Written by Local Democracy Reporter, Marie Sharp
A decision by Midlothian Council to increase the amount of money it gave staff to cover travel costs actually left some facing a higher tax bill, it has emerged.
A decision by Midlothian Council to temporarily increase the mileage rate for staff from the approved HMRC rate to a higher NHS rate left some employees facing additional tax bills.
A report due to go to elected members next week will now ask them to approve changing the rate per mile paid back to the lower rate to help staff avoid the pitfall.
It revealed that in 2022 the council agreed to temporarily change their mileage rate from the HMRC rate of 45p a mile for the first 10,000 miles followed by 25p per mile thereafter to the NHS rate of 56p a mile for the first 3,500 miles and 20p per mile therafter.
However it said an HMRC audit had raised issues with the interim rates, which remain in place, because any amount workers received using their own cars which was above its approved rate was considered a benefit in kind and taxable.
Workers would have to claim for around 10,000 miles an hour before the two rates evened out and they were not receiving addition payment.
The report said: “All amounts above the HMRC rates are taxable and incur a benefit in kind assessment. If the car user claims mileage for 10,000 miles/year, then the average mileage rate will reduce and no benefit in kind is
incurred.
“However, for the majority of employees claiming mileage at this rate since April 2022, mileage does not reach 10,000 miles. Therefore, there are benefit in kind implications for employees (notably the requirement to pay tax on the value claimed above the HMRC advisory rates).
The report asks elected members to approve a change back to the previous HMRC rate which will be backdated to April this year.
It says: “Backdating the policy will result in a small overpayment for mileage claims made to date. This will not be recovered from employees.”
Tweet Share on Facebook
