Understanding vehicle expenses for self-employed

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Claiming vehicle expenses

For self-employed who generally use their own car for business and personal use are able to claim expenses back. There are two ways of doing so:

  1. Is a simplified expense which is calculating the mileage used for business purposes at a rate set by HMRC of 45p per mile for the first 10,000 miles completed in the tax year and 25p per mile for every business mile used after that in the same tax year.
  2. The actual cost, if you use the exact cost method, you must keep a record of all motoring costs. This includes fuel, insurance, vehicle tax, roadside recovery & assistance, parts, servicing, and repairs.

Tracking your business vehicle expenses

Tracking your vehicle expenses can be done on a spreadsheet, keeping track of the date, location, miles travelled and the purpose of the trip. This will calculate how much you are owed in vehicle expenses. Most accounting software has the facility for you to track your mileage too. In the first year of business, it would be essential for you to use both methods to work out which will work best for your company as you can’t use both.

Managing vehicles used for business and personal use

If you are self-employed, you are unable to allocate the car to the business as being self-employed means the business is you. There are tips above on how to manage the difference between business vs personal use. As self-employed, if you solely want the car for business purposes, you must prove to HMRC that it will only ever be used for business purposes.