What You Can Claim As Business Expenses – Motor Expenses

 
 

If claimable motor expenses are a mystery to you, then read on...

Self-Employed and Partnerships

You have 2 options on how your business covers the cost of you using your own car, and both require you to record business mileage throughout your financial year:

  1. You keep the car out of the business, and claim periodically from the business for the mileage you do on its behalf.  The mount you are able to claim per mile is 45p** for the 1st 10,000 miles in a financial year, and 25p per mile thereafter.  This amount of 45p**/25p is deemed to cover fuel and wear and tear on the car.  The whole amount claimed in mileage each year is allowable against profits. If you do not work from home you cannot claim for the miles done to/from your home from/to work place.  VAT considerations: If you are VAT registered you can claim back some of the VAT – speak to us for further details.
  2. You can bring your vehicle into the business so that it is treated as a business asset.  You are then able to claim tax relief on this asset called ‘capital allowance’ at a set rate each year.  You can then put through the business all of the running expenses for the car for the year, i.e. fuel, repairs, road tax and insurance.
    At the end of the financial year you work out the ratio of your business mileage to your private mileage and add back the percentage equal to your private mileage on both the capital allowance and the running costs for the year.  These are adjustments that your accountant is most likely to make on your business tax calculation rather than in your accounts.   VAT considerations: You need to bear in mind that if you choose this option and you are VAT registered, and therefore claim back VAT on fuel and motor repairs, that you are required to add back fuel scale charges on your VAT returns each VAT period to account for personal use.  Click here to see the table of current VAT scale charges.

Limited Companies

You have 2 options on how your business covers the cost of using a motor car.

  1. You keep the car out of the business in your own name, and claim periodically from the business for the mileage you do on its behalf.  The mount you are able to claim per mile is 45p** for the 1st 10,000 miles in a financial year, and 25p per mile thereafter.  This amount of 45p**/25p is deemed to cover fuel and wear and tear on the car.  The whole amount claimed in mileage each year is allowable against profits.  If you do not work from home you cannot claim for the miles done to/from your home from/to work place.  VAT considerations: If you are VAT registered you can claim back some of the VAT – speak to us for further details. 
  2. The company owns the car and you run it as a company car.  The company then meets the cost of all running expenses for that car and claims back capital allowances each year, without having to add anything back for personal use in the tax calculations. 
    This sounds like a great option, but unfortunately this perk (or benefit-in-kind) is given a value (based on the list price and CO2 emissions of the car and often amounting to several thousand pounds).  This value is deemed to be part of your remuneration package and each year you have to pay personal tax and national insurance on the value, and the company has to pay Employer’s national insurance.  This usually proves to be an expensive way to run a car because of the tax liabilities it incurs.

**Update 22 April 2011
N.B.  With effect from 6 April 2011 the rate increased from 40p per mile to 45p per mile for the 1st 10,000 miles of business travel during the tax year.  The rate for mileage beyond 10,000 miles will remain at 25p. 

What You Can Claim As Business Expenses main page.

1 Response to “What You Can Claim As Business Expenses – Motor Expenses”


  • Question in relation to a and employee of a limited company or public sector using their personal vehicle for business travel:

    1) As an employee of a public sector or PLC or Ltd, I have a personal car, with a policy that comes to £700 for the year, and the class of insurance is commuting. However, in order to use the car for business travel, I need to upgrade my policy to ‘business class 1′ which makes my total premium £850 for the year. Can I claim back the £150 incremental cost of my insurance premium as a business expense from my employer?

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