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If you are self-employed as a sole trader or partnership, you can claim back the costs incurred while running your business. Expenses are subtracted from the gross profit, leaving the net profit which is taxable. Basically, claiming all allowances, reliefs and expenses will minimise your tax bill. However, the expenses claimed must have been incurred wholly and exclusively for your business. One expense that is typically incurred when self-employed is motoring expenses.

There are two methods which you can use to calculate the amount you are allowed to deduct, and you must decide which will be beneficial to you. You can claim a fixed rate per mile using the fixed rate calculator provided by HM Revenue & Customs, which also covers depreciation and other motoring expenses. This method may only be used if your business is currently below the threshold for registering for VAT. It can only be used if you aren’t claiming any other motoring expenses as these costs are built in to the rates.

The other method requires you to keep a record of actual expenses incurred, including a mileage log. Capital allowances may be claimed to cover the cost of your car. However, as this is a complex matter, professional advice should be sought. If you sell the car, give it away or stop using it for your business, you may incur a balancing charge.

Motoring expenses are claimed when you complete your self-assessment tax return. Documentation must be retained in order to verify your claim.

About The Author

Kara Copple

An experienced business and finance writer, sometimes moonlighting as a fiction writer and blogger.

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