If you are self-employed or a company director, you can claim expenses for the business use of your private car. In this article, we will briefly discuss what is a business journey, the kind of expenses you can claim and the methods you can use to claim these expenses. For the sake of simplicity we will assume you own the vehicle. We will discuss the expenses that can be claimed under any hire purchase or lease agreement in future.
To treat any expense as a business expense it must be incurred wholly and exclusively for the purpose of the trade. The same principle applies to the use of a private car. The following are a few examples of business travel:
– Journey from home to a client/potential client site
– Journey from office to a client/potential client site
– Journey to visit a supplier/potential supplier or to pick a supply
– Journey to accountant’s office
– Journey from one workplace to another workplace
These are the most common examples of allowable business journeys. A journey to and from home to a regular place of work (i.e. your office) is not allowable as a business journey.
Expenses that can be claimed:
The following running costs can be claimed for a private car
– Fuel cost
– General repair
– Change of tyres
– Road tax
– Roadside cover etc.
Methods of claim:
There are two ways car expenses can be claimed as business expense:
Add all the running costs of the car for a certain period (monthly or yearly) and claim the portion based on business mileage. In this case, keep a record of total mileage and the business mileage and apportion the cost accordingly. All the receipts of the actual expenses must be kept in this method.
In addition, capital allowance can be claimed on the value of the car. This is the allowance for general wear and tear over the vehicle’s useful life. The rate of the allowance depends on the CO2 emission level. 100% cost can be claimed as capital allowance for the electric and zero-emission car. In both cases, private use must be adjusted.
Mileage allowance payments (MAP)
HMRC has a statutory flat rate to claim travel expense for the use of a personal vehicle. 45 pence per mile can be claimed up to 10,000 miles and anything above that is 25 pence per mile. This rate includes all the running cost of the car. The cash value of this allowance can be taken out from the business weekly, monthly or yearly.
Unfortunately, capital allowance is not claimable under MAP as this has already been taken into account in the statutory rate.
The rate for motorbike is 24P per mile irrespective of annual mileage.
Expense claimed anything above the MAP rate need to be reported to HMRC as a benefit in kind and appropriate tax and NI is payable.
There are a few expenses that can be claimed in both methods:
– Car parking
– Congestion charge
– Finance cost to purchase the car (business portion)
However, parking penalties or speeding tickets are not allowable in any of them.
You need to keep a log of your business mileage. There are different types of apps available where you can keep a track of it. Or if you prefer the old-fashion way, keep a notebook in your car.
It is important to mention, only one method can be chosen for a car until it is disposed of. However, if you have two cars, you can choose the actual cost for one and MAP for the other. But you cannot mix them for the same vehicle. So, if this is your first year of business or you bought a new car, wait until the end of the year to compare which method is beneficial.
We will come back with more discussion about the car and van expenses in future.
Meanwhile, if you have any queries, please get in touch with us and we will be happy to help.