Part 4

Employment income: exemptions
Chapter 2

Exemptions: mileage allowances and passenger payments

Mileage allowances

Mileage allowance payments
229
1
No liability to income tax arises in respect of approved mileage allowance payments for a vehicle to which this Chapter applies (see section 235).
2
Mileage allowance payments are amounts, other than passenger payments (see section 233), paid to an employee for expenses related to the employee’s use of such a vehicle for business travel (see sections 235A and 236(1)).
3
Mileage allowance payments are approved if, or to the extent that, for a tax year, the total amount of all such payments made to the employee for the kind of vehicle in question does not exceed the approved amount for such payments applicable to that kind of vehicle (see section 230).
4
Subsection (1) does not apply if—
a
the employee is a passenger in the vehicle, or
b
the vehicle is a company vehicle (see section 236(2)).

The approved amount for mileage allowance payments
230
1
The approved amount for mileage allowance payments that is applicable to a kind of vehicle is—
M × R
where—
M is the number of miles of business travel by the employee (other than as a passenger) using that kind of vehicle in the tax year in question;
R is the rate applicable to that kind of vehicle.
2
The rates applicable are as follows—

Table
Kind of vehicle | Rate per mile
Car or van | 45p for the first 10,000 miles
| 25p after that
Motor cycle | 24p
Cycle | 20p
3
The reference in subsection (2) to “the first 10,000 miles” is to the total number of miles of business travel in relation to the employment, or any associated employment, by car or van in the tax year in question.
4
One employment is associated with another if—
a
the employer is the same;
b
the employers are partnerships or bodies and an individual or another partnership or body has control over both of them; or
c
the employers are associated companies within the meaning given by section 449 of CTA 2010.
5
In subsection (4)(b)—
a
“control”, in relation to a body corporate or partnership, has the meaning given by section 995 of ITA 2007 (in accordance with section 719 of this Act), and
b
the definition of “control” in that section of that Act applies (with the necessary modifications) in relation to an unincorporated association as it applies in relation to a body corporate.
6
The Treasury may by regulations amend subsection (2) so as to alter the rates or rate bands.

Mileage allowance relief
231
1
An employee is entitled to mileage allowance relief for a tax year—
a
if the employee uses a vehicle to which this Chapter applies for business travel, and
b
the total amount of all mileage allowance payments, if any, made to the employee for the kind of vehicle in question for the tax year is less than the approved amount for such payments applicable to that kind of vehicle.
2
The amount of mileage allowance relief to which an employee is entitled for a tax year is the difference between—
a
the total amount of all mileage allowance payments, if any, made to the employee for the kind of vehicle in question, and
b
the approved amount for such payments applicable to that kind of vehicle.
3
Subsection (1) does not apply if—
a
the employee is a passenger in the vehicle, or
b
the vehicle is a company vehicle.

Giving effect to mileage allowance relief
232
1
A deduction is allowed for mileage allowance relief to which an employee is entitled for a tax year.
2
If any of the employee’s earnings—
a
are taxable earnings in the tax year in which the employee receives them, and
b
are not also taxable earnings in that year that fall within subsection (3),
the relief is allowed as a deduction from those earnings in calculating net taxable earnings in the year.
3
If any of the employee’s earnings are taxable earnings in the tax year in which the employee remits them to the United Kingdom, there may be deducted from those earnings the amount of any mileage allowance relief—
a
for that tax year, and
b
for any earlier tax year in which the employee was resident in the United Kingdom,
which, on the assumptions mentioned in subsection (4), would have been deductible under subsection (2).
4
The assumptions are—
a
that subsection (2)(b) does not apply, and
b
where applicable, that the earnings constitute taxable earnings in the tax year in which the employee receives them.
5
Subsection (3) applies only to the extent that the mileage allowance relief cannot be deducted under subsection (2).
6
A deduction shall not be made twice, whether under subsection (2) or (3), in respect of the same mileage allowance relief.
6A
If the earnings from which a deduction allowed under this section is deductible include earnings that are “excluded” within the meaning of section 15(1A)—
a
the amount of the deduction allowed is a proportion of the amount that would be allowed under this section if the tax year were not a split year, and
b
that proportion is equal to the proportion that the part of the earnings that is not “excluded” bears to the total earnings.
7
In this section “taxable earnings” or “net taxable earnings” means taxable earnings or net taxable earnings from the employment for the purposes of Part 2.

Passenger payments

Passenger payments
233
1
No liability to income tax arises in respect of approved passenger payments made to an employee for the use of a car or van (whether or not it is a company vehicle) if—
a
the employee receives mileage allowance payments for the use of the car or van, and
b
the cash equivalent of the benefit of the car or van is treated as earnings from the employment by virtue of section 120 or 154 (cars and vans as benefits).
This is subject to subsection (2).
2
The condition in subsection (1)(b) needs to be met only if the car or van is made available to the employee by reason of the employment.
3
Passenger payments are amounts paid to an employee because, while using a car or van for business travel, the employee carries in it one or more passengers who are also employees for whom the travel is business travel.
4
Passenger payments are approved if, or to the extent that, for a tax year, the total amount of all such payments made to the employee does not exceed the approved amount for such payments (see section 234).
5
Section 117 (when cars and vans are made available by reason of employment) applies for the purposes of subsection (2).

The approved amount for passenger payments
234
1
The approved amount for passenger payments is—
M × R
where—
M is the number of miles of business travel by the employee by car or van—
- (a) for which the employee carries in the tax year in question one or more passengers who are also employees for whom the travel is business travel, and
- (b) in respect of which passenger payments are made;
R is a rate of 5p per mile.
2
If the employee carries for all or part of the tax year two or more passengers who are also employees for whom the travel is business travel, the approved amount for passenger payments is the total of the amounts calculated separately under subsection (1) in respect of each of those passengers.
3
The Treasury may by regulations amend subsection (1) so as to alter the rate.

Supplementary

Vehicles to which this Chapter applies
235
1
This Chapter applies to cars, vans, motor cycles and cycles.
2
“Car” means a mechanically propelled road vehicle which is not—
a
a goods vehicle,
b
a motor cycle, or
c
a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used.
3
“Van” means a mechanically propelled road vehicle which—
a
is a goods vehicle, and
b
has a design weight not exceeding 3,500 kilograms,
and which is not a motor cycle.
4
“Motor cycle” has the meaning given by section 185(1) of the Road Traffic Act 1988 (c. 52).
5
“Cycle” has the meaning given by section 192(1) of that Act.
6
In this section—
- “design weight” means the weight which a vehicle is designed or adapted not to exceed when in normal use and travelling on a road laden;
- “goods vehicle” means a vehicle of a construction primarily suited for the conveyance of goods or burden of any description.

Journeys made by members of local authorities etc
235A
1
Subject to subsections (2) and (3), a qualifying journey made by a member of a relevant authority is to be treated as business travel for the purposes of this Chapter if a qualifying payment is made by the authority—
a
to the member for expenses related to the member's use for the journey of a vehicle to which this Chapter applies, or
b
to another member of the authority for carrying the member as a passenger on the journey in a car or van.
2
A qualifying journey is not to be treated as business travel—
a
for the purposes of section 231, or
b
when calculating for the purposes of that section the mileage allowance payments paid to the member in respect of the journey and the approved amount for such payments.
3
If a journey made by a member of a relevant authority is a qualifying journey and a qualifying payment is made to the member for carrying a passenger on the journey, the member's journey is not to be treated as business travel in respect of that passenger for the purposes of sections 233 and 234 unless the passenger is also a member of the authority.
4
A journey made by a member of a relevant authority is a “
qualifying journey
” for the purposes of this section if—
a
it is a journey between the member's home and permanent workplace, and
b
the member's home is situated in the area of the authority, or no more than 20 miles outside the boundary of the area.
5
In this section “
permanent workplace
” has the same meaning as in Part 5 (see section 339).
6
The Treasury may by regulations—
a
provide for bodies specified in the regulations (which must be local authorities or bodies that have similar or related functions or purposes) to be relevant authorities for the purposes of this section,
b
provide for references in this section to a member of a relevant authority to be read as references to a member of a description prescribed in the regulations, and
c
define what is meant by “
qualifying payment
” for the purposes of this section.
7
The regulations may contain transitional provision and savings.

Interpretation of this Chapter
236
1
In this Chapter—
- “business travel” means travelling the expenses of which, if incurred and paid by the employee in question, would (if this Chapter did not apply) be deductible under sections 337 to 342;
- “mileage allowance payments” has the meaning given by section 229(2);
- “passenger payments” has the meaning given by section 233(3).
1A
For journeys that are treated as business travel for the purposes of certain provisions of this Chapter, see section 235A (journeys made by members of local authorities
etc
).
2
For the purposes of this Chapter a vehicle is a “company vehicle” in a tax year if in that year—
a
the vehicle is made available to the employee by reason of the employment and is not available for the employee’s private use, or
b
an amount in respect of the benefit of the vehicle is to be treated as the employee’s earnings for the tax year by virtue of—
i
section 120 or 120A (benefit of car treated as earnings),
ii
section 154 or 154A (benefit of van treated as earnings), or
iii
section 203 or 203A (residual liability to charge: benefit treated as earnings), or
c
in the case of a car or van, an amount in respect of the benefit of the car or van would be required to be so treated if sections 167 and 168 (exceptions for pooled cars and vans) and section 248A (emergency vehicles) did not apply, or
d
in the case of a cycle, the cash equivalent of the benefit of the cycle would be required to be treated as the employee’s earnings for the tax year under Chapter 10 of Part 3 (taxable benefits: residual liability to charge) if section 244(1) (exception for cycles made available) did not apply.
3
Sections 117 and 118 (when cars and vans are made available by reason of employment and are made available for private use) apply for the purposes of subsection (2).
Words in s. 229(2) substituted (with effect in accordance with s. 29(7) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 29(2)
Words in s. 230(4)(c) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 384 (with Sch. 2)
Words in s. 236(2)(c) inserted (with effect in accordance with s. 81(3) of the amending Act) by Finance Act 2004 (c. 12), s. 81(2)
Words in s. 236(2)(b)(iii) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 52(1)(d)
S. 235A inserted (with effect in accordance with s. 29(7) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 29(3)
Words in s. 236(2)(b)(ii) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 52(1)(c)
Sum in s. 230(2) substituted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Approved Mileage Allowance Payments (Rates) Regulations 2011 (S.I. 2011/896), regs. 1(2), 2
Words in s. 230(5)(a) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 433 (with Sch. 2)
S. 236(1A) inserted (with effect in accordance with s. 29(7) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 29(4)
Words in s. 236(2)(c) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 52(2)
Words in s. 236(2)(b)(i) inserted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 52(1)(b)
Words in s. 236(2)(b) substituted (with effect in accordance with Sch. 2 para. 62 of the amending Act) by Finance Act 2017 (c. 10), Sch. 2 para. 52(1)(a)
S. 232(6A) inserted (with effect in accordance with Sch. 45 para. 153(2) of the amending Act) by Finance Act 2013 (c. 29), Sch. 45 para. 63
Pt. 4 modified (10.6.2021) by Finance Act 2021 (c. 26), s. 26(3)