SE31870 - Travel expenses: general - employees using own car for work - how to calculate relief using 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

To use the simpler method the employee will need:

• A record of all of the miles driven in the car that qualify for relief as business travel (see final paragraph of SE31840)

In order to calculate the allowable cost of business travel in the car the employee simply multiplies the number of business miles travelled by the appropriate authorised mileage rate(s) for that particular car.

The allowable cost of business travel should then be compared with any mileage or car allowances received, and which have not been subjected to PAYE, in order to calculate the amount of any

• mileage profit - which is taxable, or
• excess expenditure – which is deducted from Schedule E emoluments

It is not uncommon for employers to reimburse employees for business travel at a rate equal to the appropriate Inland Revenue`s authorised mileage rate. Where this is the case, there will be neither profit nor a deduction.

See example SE31907.