SE31905 - Travel expenses: general - employees using own car for work - calculation of allowable expenses - statutory basis - example
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
Employee buys own car for £6,000 and starts using it for business travel. In 99/2000 the employee travels 10,000 miles in the car. 2,500 of these miles count as business travel for tax purposes. The employee receives from the employer a mileage allowance of 30p a mile for all business travel.
Step 1 | |||
| Total mileage allowances received | |||
| 2,500 miles at 30p a mile | £750 | (A) | |
| |||
| Calculate the total motoring costs for the year as follows | |||
| Insurance | £400 | ||
| Road fund licence | £140 | ||
| Fuel and oil | £1,000 | ||
| Servicing and repairs | £300 | ||
| Capital allowances for the year | £1,500 | ||
| Total motoring costs for the year | £3,340 | (B) | |
| |||
| Business miles travelled | 2,500 | (C) | |
| Total miles travelled | 10,000 | (D) | |
| Proportion of motoring costs relating to business travel for the year | |||
| 2,500(C)/ 10,000(D) x 3,340(B) | £835 | (E) | |
| |||
| Difference between total mileage allowances received (A) and business proportion of motoring costs (E) | £85 |
In this example as business proportion of motoring costs (E) is
greater than total mileage allowances received (A), the employee
can claim relief on the difference of £85 against earnings of
the relevant employment.
If the total mileage allowances received (A) had been
£835 and the business proportion of motoring costs (E) had
been £750, the employee would have been taxable under Schedule
E on the mileage profit of £85.
