Car and Van Expenses for the Self Employed

Introduction

A common query we are asked is about the use of your own car for your business.

In this guide we explore business use of your own car for sole traders.

Options:

1.      Use HMRC’s ‘simplified expenses’ for business mileage.

OR

2.      Claim for a proportion of actual costs.

It is important to note that you can only change the method of claiming when you change vehicle.

We will look at each option in more detail:

Option One – claim business mileage

The HMRC flat rate per mile is:

·         Cars and goods vehicles (first 10,000 miles per annum):  45 pence per mile

·         Cars and goods vehicles (after 10,000 miles per annum):  25 pence per mile

·         Motorcycles:  24 pence per mile

The HMRC flat rate is an all-encompassing rate, so takes into account all running costs (fuel, insurance, tax, wear and tear) so if you claim using this method, it means you cannot claim for any actual costs relating to the running of your vehicle.  You can also claim for other vehicle expenses such as parking and tolls and hire purchase interest, which do not relate to the running of your vehicle.

Option two – claim based on actual costs

This could be based on a vehicle that you either lease, are purchasing under a finance agreement or own outright.  When you claim for actual costs, these need to be apportioned so you disallow any personal use from your claim. 

We will look at each in turn:

Lease car – what can you claim for?

·         You can claim for the cost of the lease (restricted to 85% of the cost of the lease for vehicles with emissions over 50g/km).

·         Running costs:  fuel, insurance, road tax, repairs.

Purchased car – what can you claim for?

·         Claim capital allowances (CA) based on the value of the vehicle when you brought it into the business. 

·         The CA percentage allowance you can claim will depend upon the vehicle’s emissions.  

·         Running costs:  fuel, insurance, tax, repairs.

·         The interest element of car finance (not the capital repayment, as this is dealt with under the claiming of capital allowances).

What classes as business use of my vehicle?

You are unable to claim for mileage which is classed as commuting.  This means you cannot claim for journeys to a fixed place of work.  If you do have a fixed place of work, you can claim for business journeys such as visiting clients and suppliers, attending business meetings and events.  If you claim based on actual costs, you will need to keep a track of your mileage and work out what proportion you use the vehicle for business vs personal.

In conclusion

Claiming flat rate mileage is often the easiest and simplest way of claiming for motor expenses.  There are, however, factors which need to be taken into consideration, including the cost of the vehicle and its emissions.  When going into business, or considering changing your vehicle, seek advice at the outset so the relevant circumstances can be taken into account.

If you would like to discuss this further, please contact us at:  hello@sphereaccountants.co.uk