The spreadsheet below can be used to calculate the tax rebate that you are entitled to at the end of the financial year. This is based on the inland revenue setting an Authorised Mileage Rate for the year.

The Authorised Mileage Rate is a rate per mile which you can receive from your employer tax free for business mileage using your own car. Where your employer pays less than the approved rate, you can claim tax relief for the difference. For example, if your employer pays 10p / mile and the IR authorised mileage rate is set at 40p / mile, then you can claim tax relief for the difference, ie 30p / mile at your highest tax rate (22% or 40%). In this case with for example a 22% tax rate, you would be entitled to 6.6p (22% of 30p). Should you be paid more by your employer than the IR authorised mileage rate, you will be expected to pay tax on the excess. 

The Authorised Mileage Rate reduces after a set threshold. For the 2002-2003 financial year, the rates are set at 40p/mile for the first 10,000 business miles travelled, then 25p/mile thereafter.  Click here to find the current mileage rates from the Inland Revenue web site.

For further details on using you car for work and claiming back your allowance from the Inland Revenue, refer to their leaflet IR125, which can be viewed by clicking here.

Note that I have assumed that, like me, you would claim any monies due back at the end of the financial year. However, you can write and ask your local tax office to take business miles into account when assessing your tax code, so effectively you will pay less tax each month. The down side to this is that if you over-estimate your monthly business miles, you may end up having to pay money back to the Inland Revenue at the end of the financial year.

As my get-out clause, I better just remind you that I cannot be held liable for any errors or omissions within the above spreadsheet.