For many self-employed people, motor expenses will be partly a business expense and partly a private expense. In this case, there is a clear identifiable business cost, the miles you travel on business, so these miles are the costs associated with them can be claimed as a business expense.
There are two methods you can use when it comes to claiming expenses for the use of your private car for work:
1. Total expenses method: Work out the proportion of miles you use for business. Here you would add up all of your motor expenses for the year and work out the percentage that your car is used for business based on the number of business miles that you do. You can also potentially claim tax relief for part of the cost of your vehicle by claiming capital allowances.
2. Mileage Allowance: Claim a fixed rate mileage allowance for business travel. The cost of buying the vehicle is included in the mileage claim. This method is often more convenient for many small businesses.
You can only use one of the above methods, and once you have chosen you would usually need to stay with this method until you replace your vehicle.
Total expenses method
To use this method you would need to keep a record of all of your motor expenses, these would include:
- fuel
- servicing
- insurance
- road fund licence
- subscription to motoring organisations
You would also need to keep a mileage record, showing both business and private trips.
Mileage allowance
HMRC permits self-employed people to claim a fixed mileage allowance to cover motoring expenses, as an alternative to working out the total expenses. The allowance only covers journeys which are wholly, or partly, for business, where this can be proven through a record of business mileage.
Here are the rates per business mile
- Cars and goods vehicles first 10,000 miles: 45p per business mile
- Cards and goods vehicles after 10,000 miles: 25p per business mile
- Motorcycles: 24p per business mile
You can read more about this allowance here: https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim75005
Choosing which method to use?
In both cases, you would need to keep a record of your business and personal mileage, so this can be referenced when claiming your motor expenses. If you have high motoring costs then it may be worthwhile to use the total expenses method for your business, though this will take more time to work out. The mileage allowance allows for a simplified option for your motor expenses.
