SE31865 - Travel expenses: general - employees using own car for work - description of the Inland Revenue's authorised mileage rates

Important note:

From 2002/03 the rules described below have changed. There is a new statutory mileage allowance relief rate that is used to calculate tax relief that employees can get for using their own vehicles for work. Employees are no longer entitled to deduct actual costs (the exact method) or to use the non-statutory authorised mileage rates (the simple method). There is detailed guidance on the new scheme at SE31330 onwards.

2001/02 and earlier

The Inland Revenue`s authorised mileage rates are estimates of the average motoring costs for a range of car engine sizes. They take account of all motoring costs, including items such as insurance and depreciation. For each car engine size there are two rates:

• a higher rate for the first 4,000 business miles, and
• a lower rate for each business mile over 4,000 miles

The different rates for business mileage over 4,000 miles a year reflect the fact that some costs, such as road tax and insurance, do not increase with greater mileage. The higher the total mileage, the lower the cost per mile of running a car.

When an employee is using the Inland Revenue`s authorised mileage rates to calculate motoring expenses do not accept separate claims for individual items of motoring expenditure. Similarly, do not accept claims for capital allowances. An employee who wishes to have specific items of expenditure taken into account may of course choose to calculate motoring expenses on the statutory basis.

The only exceptions to this rule are

• The business proportion of the finance element of hire purchase payments - see SE31855.
• The business proportion of interest on a loan taken out to buy a car which is used for business travel – subject to the time limit described at SE31890.

Where appropriate, relief for these items can be given in addition to relief calculated using the Inland Revenue`s authorised mileage rates.

Details of the amounts of the Inland Revenue`s authorised mileage rates can be found as follows:

1996/97 – SE31895

1997/98 to 2000/01 inclusive – SE31900.

2001/02 – SE31901