The question of how best to structure the use of a car which is used partly for business and partly for private use, is common. Whilst each situation is specific to your individual needs, there are some general rules that apply and, that are worth knowing.
Sole Traders – what motor expenses can I claim?
Sole Traders can claim all motor expenses, including;
- Car tax
- Breakdown membership (AA, RAC, etc)
- Parking costs
- Lease payments
- Loan interest
These expenses need to be apportioned in the appropriate business/personal usage ratio. It is also possible to claim tax relief on the cost of the vehicle (apportioned on business/personal use ratio) via capital allowances.
Home to work journeys – can these be claimed?
Expenses incurred on journeys from home to work (such as fuel) and vice versa cannot be claimed.
Company Car – what relief can I can claim through my limited company?
If a company owns the car then it can claim full tax relief on all car related expenses, including repairs and maintenance costs, insurance, car tax, depreciation, etc. There is no apportionment of business/personal usage as there is with a sole trader. However, there are personal tax implications on the director of personal use of the vehicle.
These implications are dependent on the carbon emissions of the vehicle and the list price of the vehicle. Typically, the higher the carbon emissions the higher the personal tax due for private use of the vehicle.
Owning a car personally – can I deduct any expenses from the company?
Where you have a personally owned vehicle you can claim mileage costs from the company for business journeys. The claims can be made at 45p for the first 10,000 business miles and 25p thereafter. Remember though – travelling from home to work DO NOT classify as business journeys – these are private.