SE31908 - Travel expenses: general - employees using own car for work - calculation of allowable expenses - using the Inland Revenue's authorised mileage rates when car changed during year - 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 uses own 1400cc car for business travel in 99/2000. After travelling 3,000 business miles in that car the employee changes to an 1800cc car and does a further 2,000 business miles. The employer pays 40p per mile throughout the year. The allowance has not been subjected to PAYE.

Step 1

Step 2

For 99/2000 the Inland Revenue authorised mileage rates for cars of 1000 - 1500cc are 35p for the first 4,000 business miles and 20p thereafter. For cars of 1501-2000cc the rates are 45p for the first 4,000 business miles and 25p thereafter.

Step 2a

If all the mileage in the year had been done in the first car the relief due would have been

Actual mileage in the first car was 3/5 of the total (3,000/5,000). Relief due for the first car is

Step 2b

Repeat the process for the second car. The relief due if the full annual mileage had been done in the second car is

Actual mileage in the second car was 2/5 of the total (2,000/5,000). Relief due for the second car is

Step 3