SE31907 - Travel expenses: general - employees using own car for work - calculation of allowable expenses - using the Inland Revenue's authorised mileage rates - 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.
Car 1
Step 1 | |||
| Mileage allowance received | (5,000 x 43p) | £2,150 | A |
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
| 4,000 x 45p | £1,800 | ||
| 1,000 x 25p | £250 | ||
| £2050 | B | ||
| |||
| Work out the difference between mileage allowance received (A) and the allowable cost of business travel (B) | £100 |
Mileage allowance received (A) exceeds allowable cost of
business travel (B) so the difference is a mileage profit of
£100.
If allowable cost of business travel (B) exceeded mileage
allowance received (A), then the difference would be an allowable
deduction to set against other earnings of the employment.
