Essential car user allowance

An essential car user allowance is a payment some councils make to staff whose job cannot be done without regular use of their own car, such as social workers, environmental health officers and highways inspectors. It usually has two parts: a fixed annual lump sum, paid monthly, and a mileage rate for each business mile. Staff who drive for work only now and then are “casual users” and get mileage only. Each council sets its own amounts, so there is no single national rate.

Essential users and casual users

The distinction comes from the old national NJC car allowance scheme, which most councils based their own schemes on. Under that model:

• An essential user is someone whose role needs a car to be available whenever required. They get a lump sum to help with the fixed costs of owning a car (insurance, tax, depreciation) plus a lower per-mile rate.
• A casual user drives for work occasionally. They get no lump sum but a higher per-mile rate to cover both running and fixed costs.

The national rates were removed from the Green Book some years ago, and councils now set their own scheme locally. Some have kept the essential and casual split with their own figures. Many have scrapped the lump sum and pay everyone the HMRC approved mileage rate, which keeps the payments tax-free and simple to administer. A few use pool cars, hire cars or lease schemes instead.

The council decides which category a post falls into, based on the needs of the post, and how much you personally end up driving does not change it. The job description or offer letter should say whether a post is essential user.

What it is worth

Each council sets its own lump sum and mileage rates, so check the figures in its car allowance or travel policy, which is usually on its intranet or available from HR before you accept an offer. Compare two council jobs that both involve driving on the lump sum and the mileage rate together, and estimate how many business miles you will do. For a role with heavy daily driving, the mileage rate matters more than the lump sum. With a lot of office days, the lump sum is the bigger part.

In the NHS, the equivalent rules are in the NHS Terms and Conditions Handbook, with their own reimbursement rates. Civil Service departments set their own travel policies.

How the tax works

HMRC sets approved mileage allowance payment (AMAP) rates for business journeys in your own vehicle. The current rates are on the gov.uk travel, mileage and fuel rates page.

• Mileage payments up to the AMAP rate are tax-free and do not need reporting.
• If the council pays more than the AMAP rate per mile, the excess is taxable and goes through payroll.
• The essential user lump sum is treated as earnings, so Income Tax and National Insurance are deducted from it like salary. It shows on your payslip as a separate line.

If the council pays you less than the AMAP rate per mile, you can claim Mileage Allowance Relief from HMRC on the difference, through your HMRC online account or, if you already file one, through Self Assessment. Keep a record of your business mileage and what the council paid you, because HMRC can ask for it. The mileage allowance guide goes through the claim.

Business mileage does not include your ordinary commute from home to your normal workplace. If you are home-based or go straight to visits, the council’s policy sets out how mileage is counted, and HMRC’s rules on temporary workplaces apply for tax.

Insurance and the car itself

Essential users normally have to provide a roadworthy car that is available when needed. Your car insurance must cover business use, which standard social, domestic and pleasure cover usually does not, and the council will ask to see your certificate. The extra cost of business cover is one reason the lump sum exists.

You will usually need to show your driving licence, and some councils run regular licence checks. If you lose your licence, the council will look at whether you can still do the job, and the policy normally says what happens to the allowance.

You remain responsible for parking fines and penalties while driving for a council job, unless the policy says otherwise. Some councils give essential users permits for their own car parks.

Changes to allowances

Councils have often saved money by removing or cutting essential car user allowances. An allowance that is part of your contract cannot simply be withdrawn. The council has to consult, and changes to many contracts at once involve collective consultation with the recognised unions. Some councils pay protected allowances for a set period after a change.

If you are told your allowance will end, ask for the written policy, the consultation documents and any protection arrangements. Your union or ACAS can advise if you think the process has not been followed. The council benefits guide covers the rest of the Green Book package, and the payslip guide shows where allowances and mileage appear on your pay.