Former Labour minister Jim McMahon has issued a powerful call for the Government to direct HMRC to urgently update its mileage rates, which have remained frozen for 15 years, arguing this would demonstrate to working people that they have a government on their side. The self-assessment tax deadline recently passed, with HMRC focused on ensuring accurate and timely tax returns from taxpayers. However, McMahon emphasises that it is high time the tax office heeds its own advice and revises its inaccurate mileage rates, which are now severely outdated amid soaring living costs.
The Impact of Frozen Mileage Rates on Working People
Over the past decade and a half, the cost of living has escalated dramatically, with increases in food, energy, rent, mortgages, and notably, the expenses associated with running a car. For millions of individuals who depend on their vehicles for work, these costs are unavoidable. Since 2010, petrol prices have surged by 15%, car insurance has risen by 56%, road tax is up 39%, and repairs and maintenance have increased by 40%. Despite these steep hikes, HMRC's mileage rate has stagnated, directly burdening working people.
Who Bears the Brunt of This Injustice?
This issue does not solely affect the self-employed; it also impacts employees who receive mileage reimbursements from their employers. The very workers who keep the economy functioning are effectively paying to perform their jobs, which drags real wages below the National Living Wage and exacerbates the cost-of-living crisis. This situation amounts to a stealth tax on those who are doing the right thing and adhering to the rules, sometimes leaving working people out of pocket by thousands of pounds annually.
Disparities in Reimbursement Rates Across Sectors
The Government is well aware of this problem. Health unions have successfully negotiated fairer reimbursement rates for NHS staff, such as community midwives and occupational therapists, who currently receive 56p per mile, compared to the HMRC rate of 45p. These unions continue to campaign vigorously for rates that accurately reflect the real cost of operating a vehicle.
For workers outside the NHS, particularly home care staff, the situation is even more dire. Many of these individuals earn at or just above the National Living Wage, yet they are reimbursed approximately a quarter less than NHS staff and around a third less than the true cost of driving. Research conducted by Unison and the RAC Foundation indicates that the actual cost of driving for work is now closer to 67p per mile. While HMRC advises taxpayers to calculate their own costs, nine out of ten employers rely on the official rate, resulting in millions of workers suffering financial losses.
A Call for Fairness and Action
For 14 years, the Conservative government has permitted this injustice to persist. Working people are not seeking special treatment; they are merely asking for fairness. Labour, as the party of working people, is committed to addressing this issue. McMahon is urging the Government to instruct HMRC to finally refresh the mileage rate, thereby showing working people that they have a government that supports them. This move would not only alleviate financial strain but also restore trust in the system, ensuring that those who contribute to the economy are not unfairly penalised.
