Sole Traders & Partnerships – how to claim motor expenses

If you use your own car for business travel then you can claim a proportion of your costs against your business income.

So how do you do that?

Well, under the simplified expenses rules for self-employed business owners (NOT limited companies) you can simply claim a flat rate per business mile if you use your own car, van or motorbike for work.

The rates are currently (June 2016) as follows:

Annual Mileage

Rate per mile

Cars & vans - up to 10,000 miles

45p

Cars & vans - over 10,000 miles

25p

Motorbikes

24p

So if you've driven 11,000 business miles in a year you can claim £4,750 (10,000*45p + 1,000*25p).

To see the up to date rates, click here.

So what do you need to be aware of?

Well, you can't claim the flat rate allowance if you've already claimed Capital Allowances on your vehicle.

And this rate includes all your running costs for your car - including insurance, maintenance & repairs as well as fuel costs.  So you won't be able to claim any of these separately.

And once you've used the flat rate for a vehicle, you must continue using the flat rate - but you don't have to claim the flat rate for every vehicle you use for business.

So what's the alternative?

Well, you could charge the business a proportion of your actual running costs (fuel, maintenance, servicing, repairs etc) based on the amount of business mileage you do each year. 

So let's look at an example:

You have total running costs of £5,000, total mileage of 10,000 miles and 5,000 business miles.  You can charge your business £2,500 (£5,000 * 50%).

You can also claim a proportion of the purchase price of the car via capital allowances - but, again, you would need to reduce this claim by the private element of your car usage.

For most self-employed business owners, using the flat rate method is going to be far easier but it's worth doing the calculations when you first buy your car to make sure you're not losing out.

To see what other expenses you can claim as a sole trader or partner, just click here.

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