Ten years on

[Dieselman]

Employer pays 28ppm and receive the difference via reduced tax deductions on my income.

The allowance is taxable.

It's a horribly complicated system and I could not understand it for a while but have done the calcs and the above looks about right.

The whole thing is taxable, not just the monthly allowance.

You are not claiming 45-ppm, you are claiming a taxable difference between what you are paid and the 45-ppm.

If what you are paid is greater than the 45-ppm then you pay tax on the difference, if less then you make a recovery.

It's really simple in reality.

In your case you pay income tax on the monthly allowance and the rate paid per mile at 28p, then claim that against the amount of miles driven at 45p/25p.

lets say you are paid £500 pcm + 28ppm for say 1500 miles pcm.

total payment is £920 pcm * 12 months = £11,040

The tax free allowance would be 10,000 * 0.45 and 8,000 * 0.10, so £6,500.
The difference between £11040 and £6500 is £4540, so this is what you would pay tax on, the first £6500 being effectively tax free.