SE31875 - Travel expenses: general - employees using own car for work - how to calculate relief using the Inland Revenue's authorised mileage rates when car changed during year

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

Where the employee changes his or her car during the year, (but still has only one car at a time) the underlying principle is that there should only be one lot of relief at the higher 'first 4,000 business miles' rate (see SE31865).

If all the cars used in the year fall into the same engine size band there is no problem: the business mileage for each car in the year can be added up and a single calculation made.

Where the cars fall into different engine size bands, the higher and lower mileage rates need to be apportioned between the cars. Do this by reference to the business mileage travelled in each car. See example SE31908.

Some employers have agreed with their PAYE Tax Office that they will carry out the calculation for their employees instead of using a Fixed Profit car Scheme profit table (see SE30200 onwards). They too should use this method where there is a change of car during the year.