Where an employee uses his or her own car for business journeys their employer can pay them an approved mileage allowance payment (AMAP), free of tax and NIC.

This AMAP rate has been stuck at 40p per mile since about 2002.

The AMAP will increase to 45p per mile from 6 April 2011 for the first 10,000 business miles per year, any additional miles can be reimbursed at 25p per mile. If the employer does not pay the full AMAP rate the employee can claim the additional amount in tax relief from HMRC.

The tax free AMAP can also be paid by charities to volunteers. The self-employed, who have profits below the VAT registration threshold (£73,000 from 1 April 2011), may also use the AMAP rate as a substitute for motor expenses claimed in their accounts.

Where an employee carries a fellow employee as a passenger on a business journey, an additional 5p per mile tax free can be paid. The rate will also now apply to volunteer drivers who take other volunteers on business/ charity related journeys.