Motor vehicle expenses

Motor vehicle expenses

If you use a motor vehicle in the course of running your business, you are entitled to claim motor vehicle expenses against any profits you make. Doing this will reduce your profits and therefore the amount of tax you’ll need to pay.

The vehicle must be owned by the entity that’s claiming the motor vehicle expenses. This means:

  • Sole Traders – Must be owned by you
  • Partnerships – Must be owned by the Partnership
  • Limited Companies – Must be owned by the company

There are basically 2 ways to calculate, record and claim back Motor Vehicle expenses

  • A proportion of the actual cost
  • A standard flat rate based on mileage

You are free to choose which but once you have decided a claimed motor vehicle expenses on that vehicle you must you the same method each year.

Using the Actual Costs to calculate motor vehicle expenses

If you choose this method, you can include the business proportion of any associated motor vehicle expenses, such as:

  • vehicle insurance
  • MOT
  • repairs and servicing
  • fuel
  • parking
  • hire charges
  • vehicle licence fees
  • breakdown cover
  • Tyres

To calculate the amount associated with the business you’ll need to work out for the tax year:

  • The number of business miles travelled
  • The number of personal miles travelled
  • The total number of miles travelled

You then calculate the percentage of business miles travelled in the tax year and multiply that by the total amount of Motor Vehicle Expenses

Example

  • Business miles = 6,000
  • Personal Miles = 4,000
  • Total Miles = 10,000
  • Percentage of business miles = 60%
  • Total Motor Expenses = £3,000
  • Total Motor Expenses which can be claimed = 60% of £3,000 = £1,800

Contact me if you need help with calculating Motor Vehicle Expenses

Using the Flat Rate to calculate motor vehicle expenses

Calculating your motor vehicle expenses using a flat rate is usually more simple.

You can use simplified expenses for:

  • cars (except cars designed for commercial use, for example black cabs or dual control driving instructors’ cars)
  • goods vehicles (for example, vans)
  • motorcycles

You cannot claim simplified expenses for a vehicle you’ve already claimed capital allowances for, or you’ve included as an expense when you worked out your business profits.

Vehicle Flat rate per mile with simplified expenses
Cars and goods vehicles first 10,000 miles 45p
Cars and goods vehicles after 10,000 miles 25p
Motorcycles 24p

Example

You’ve driven 6,000 business miles over the year.

Calculation:

6,000 miles x 45p = £2,700
Total you can claim = £2,700

You do not have to use flat rates for all your vehicles. Once you use the flat rates for a vehicle, you must continue to do so as long as you use that vehicle for your business.

You can claim all other travel expenses (for example train journeys) and parking on top of your vehicle expenses.

Simplified expenses are an easier way of calculating some of your business spending using standard rates instead of working out the actual costs.

You don’t have to use them. It’s your choice and you should choose whichever is better for you. Not just financially but also in terms of the time and administrative burden each method takes.

Who can use the flat rate?

You CAN use them if you are:

  • A sole trader, or;
  • A business partnership that has no companies as partners

Help with Motor Vehicle Expenses

You can use this handy checker to compare what you can claim using simplified expenses with what you can claim by working out the actual costs. This will help you work out if simplified expenses suits your business.

Get support from a Licensed Accountant

If you are not confident with any of this or don’t have the time, getting a licensed accountant to do it for you can actually save you money.  It can free up your valuable time which you can use to concentrate on your business.  You can also benefit by knowing it has been done correctly and on time. Mistakes can be costly.  As can missing the deadline.

If you need to complete a self assessment tax return for the first time or have decided that you need some assistance, as your HMRC registered agent, I can help.