Using your tax calculator, why is the travel allowance deducted from your take home pay? I understand 80% is included for your PAYE calculation, but your travel allowance should get paid out, unless the company pays costs on your behalf. What am I missing?
You are correct - 80% of your travel allowance is included in your taxable income for the purpose of working out the PAYE you owe. However, when you complete your tax return, if you keep a logbook and can therefore justify your business mileage traveled, you can claim a deduction for travel, thereby reducing the tax you owe.
Therefore, your travel allowance is paid out to you, but the tax on it can be reduced depending on the amount of business kms you do, purchase price of your car, etc.
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