There are essentially two types of travel allowances that employers can offer their employees. The first type includes allowances or advances with regards to general business-related transport expenses, while the second type covers allowances or advances to be used for expenses in relation to a vehicle used by the taxpayer for business purposes.
Employers are required to withhold pay as you earn (PAYE) from the travel allowance provided to the employee who uses their own vehicle for business purposes.
PAYE is calculated on 80percent of any travel allowance paid to an employee each month. Where employers are satisfied that at least 80percent of total mileage to be travelled by the employee in the tax year will be for business, PAYE may be calculated based on 20percent of the travel allowance paid.
Any amount of a travel allowance that a taxpayer does not actually expend for business purposes will form part of their taxable income.