SE31890 - Travel expenses: general - employees using own car for work - interest on car loans

Section 359(3) and (4) ICTA 1988

Important note:

Employees cannot get relief on car loan interest after 5 April 2002. See SE31335.

2001/02 and earlier

If an employee takes out a loan to buy a car which is used for business travel, the employee can get tax relief for the interest paid. The relief is calculated as the proportion of the total interest which relates to business travel. So an employee who drives 20,000 miles in the tax year, of which 5,000 count as business travel for tax purposes, will get tax relief on one quarter of the interest.

There is a time limit on the period for which this relief can be given. The employee can get relief for the tax year in which he or she took out the loan, and for the following three tax years. So if a loan was taken out in January 1999, the employee can get tax relief for the period January 1999 to 5 April 1999, and for the full tax years 99/2000, 2000/01 and 2001/02.