1 Travel Allowance Principles
Of the three business travel compensation options, the reason why employers choose travel allowances is that the administration effort needed to pay a fixed travel allowance amount every month appears to be very low.
Travel Allowance Tax Calculation Principles
As far as taxable income and income tax at the end of the tax year is concerned, based on the vehicle’s determined value and the actual business kilometers recorded in the employee’s logbook, the business travel portion of the travel allowance is not taxable income – only the private travel portion of the allowance is taxable income.
The same tax principle applies to remuneration and PAYE, except that the business and private travel portions of the travel allowance are estimated using the ‘80%/20%’ inclusion rule discussed in a section beneath, therefore the PAYE calculated is only as accurate as the estimate of the remuneration value.