SE31909 - Travel expenses: general - employees using own car for work - calculation of allowable expenses - using the Inland Revenue's authorised mileage rates - two or more cars at the same time - 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

An employee uses own 1800cc car for business travel. In 99/2000 the employee travels 5,000 miles on business. The employer pays a motor mileage allowance of 43p per mile. The allowance has not been subjected to PAYE.

The employee also has a 2500cc car which the employee uses to travel an additional 1,000 business miles in 99/2000.

Car 1

Step 2

For 99/2000 the Inland Revenue authorised mileage rates for cars of 1501-2000cc are 45p for the first 4,000 business miles and 25p thereafter. So the cost of business travel is calculated as

Mileage allowance received (A) exceeds allowable cost of business travel (B) so the difference is a mileage profit of £100.

Car 2

Step 2

For 99/2000 the Inland Revenue authorised mileage rates for cars of more than 2000cc are 63p for the first 4,000 business miles and 36p thereafter. So the cost of business travel is calculated as

Allowable cost of business travel (B) exceeds mileage allowance received (A), so the difference of £200 is an allowable deduction. In the first place this is set against any mileage profits of the employment, and any surplus can be set against other emoluments of the employment.

Overall position

(For an employee within Self Assessment, this net figure is the one to enter at box 1.32 of the employment page for that particular employment in the SA return).