Use a car for the purpose of conducting business? You’ll probably be able to claim some of the running costs as a business expense. However, it’s important to get this right as making inaccurate claims can land you in a lot of trouble.
The first thing to remember about business expenses is that they must be solely for the purpose of conducting business. When it comes to cars, things can get a bit tricky if you have multiple uses for a vehicle.
If you use your vehicle for both personal and business use – it’s difficult to know where you stand on expenses.
Types of expenses you might be able to claim for
Repairs and servicing
What you can’t claim for
Non-business related driving costs including travel between home and work
If you use a business-only vehicle
When you buy a vehicle for your business, you can claim this as a capital allowance if you use traditional accounting. However, if you use cash basis accounting, you can only claim this as a capital allowance as long as you’re not using the simplified expenses method.
You’ll also be pleased to know you can claim for running costs too. If your vehicle is only used for business, then it’ll be easier to claim for as you won’t have to work out the proportion of personal vs business use.
Speak to your accountant to make sure you can claim for all of the above and to check if you’re unsure about anything. We’ve also put together a handy video on what you can claim for when your car is for business use only.
If you use a car for business AND personal use
The good news is, you can claim for expenses on your own car. The bad news – you can’t claim for everything since you’re not allowed to claim for anything that comes under personal usage.
That’s where things get a bit tricky. How do you know what to claim for? This all depends on your proportion of business vs personal use. There are a few ways you can work this out.
Method 1: Flat rate (simplified expenses)
This is the method of calculating vehicle costs on mileage rather than the actual costs of buying and running the vehicle.
For vehicles within their first 10,000 miles driven for business purposes, you can claim a flat rate of 45p per mile for business use. For vehicles over 10,000 miles, this goes down to 25p. Motorcycles are set at 24p per mile.
To claim for the actual costs of running your vehicle, you will need to keep a detailed record of everything you spend on it, including fuel, insurance, tax, repairs and so on.
A simple way of working out the business vs personal use proportion is to record all your business mileage in a year and compare it to your overall mileage. That way, you can work out a percentage from there. You will then need to apply that percentage to all costs that are considered allowable expenses and only claim for that proportion.
Get help and guidance from a professional
Working out expenses like this can be a little unclear because it depends on your individual circumstances – so when it comes to your specific case, you won’t find exact answers online.
For this reason, the best advice we can give is to speak with an accountant if you don’t already. They will be able to guide you in the right direction and clarify any doubts or confusion you have.