There are two options if you use a car in your self-employed business for business and private purposes.
You can buy the car through your business, claim a capital allowance, and write off the costs of running the car as a business expense, and in both instances, you will need to adjust your claims to eliminate any private use. In practical terms, this will mean recording your total and private mileage (or business mileage) and reducing the capital allowance and expenses claims accordingly.
Alternatively, you could keep a written record of your business mileage and claim expenses from your business using the approved flat rates. Presently, these are:
- The first 10,000 business miles at 45p per mile,
- Over 10,000 business miles at 25p per mile.
For example, if your business mileage for a year amounted to 12,000 miles you could claim up to £5,000 (10,000 miles at 45p and 2,000 miles at 25p). This amount would be a legitimate business cost for tax purposes and is a tax-free receipt that you can use to defray the actual purchase and running costs that you will be paying personally, outside the business.
This simplified method for claiming relief for the use of your car can only be used if you are not claiming capital allowances for the vehicle or charging any actual running costs to your business.
Also, you do not have to use the simplified method for all your business vehicles, you can pick and choose. Once you have elected to use the simplified claims process you must continue to do so for as long as you use the vehicle in your business.
This simplified option for the use of a car does not affect your ability to claim other travel costs, train fares etc., or parking costs.
To decide which may be the best choice for your business you will need to consider the car purchase price, annual running costs, and your estimated business and private mileage. Please call if you would like our help with the calculations.