An employee uses their own car for 12,000 business miles in a year. The employer pays 30p per mile. Approved mileage allowance payments are 45p per mile for the first 10,000 miles and 25p per mile after that. What tax deduction can the employee claim?
Answer and explanation
Correct answer: D. £1,400
- Step 1: Approved amount = 10,000 × 45p + 2,000 × 25p = £4,500 + £500 = £5,000.
- Step 2: Amount paid = 12,000 × 30p = £3,600.
- Step 3: The employee can claim relief for the shortfall: £5,000 - £3,600 = £1,400.
Answer
£1,400.
Why not the others: £5,000 is the approved amount, but the employee has already received £3,600. £3,600 is the amount the employer paid. £400 applies the 25p rate to all the miles and gets a different shortfall.
Practise more Income tax and national insurance contributions.
Free questions with an explanation for every one, and full timed ICAEW ACA Certificate Level mock tests.
More Income tax and national insurance contributions questions
- An employee in England has a salary of £62,000 and no other income in 2026/27. The personal allowance is £12,570, the basic rate band is £37…
- For the employee above, with a salary of £62,000 in 2026/27, what are the employee's Class 1 NIC and the employer's Class 1 NIC? Assume the…
- A company director has a salary of £12,570 and receives dividends of £30,000 in 2026/27. The dividend allowance is £500 and the dividend ord…
- An individual has adjusted net income of £110,000 in 2026/27. The personal allowance of £12,570 is reduced by £1 for every £2 of income abov…
- Marriage allowance allows a spouse to transfer part of their personal allowance to the other. Which condition must be met?
- An employee receives an interest-free loan of £8,000 from their employer. Throughout the year the total of loans to the employee does not ex…