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John M Taylor & Co | Accountants Paisley/Taxation/Vat Returns/Business Start Ups/Sage/Payroll/Bookkeeping

Tax relief on motor expenses when self employed

Where self employed individuals use their private car for business purposes they are able to claim expenses from the business to compensate. In order to claim motor expenses from the business any relevant journeys must be wholly and exclusively for business purposes.
There are two methods via which motor expenses can be claimed:

  1. The individual must keep detailed records of all expenditure incurred in connection with the motor vehicle along with a detailed record of all business mileage travelled. They can then claim the relevant proportion of expenditure in line with the proportion of business mileage to total mileage.

    The key here is that you should ensure that you maintain a record of all your mileage so that you can verify the proportion of business use. This is a common area that HMRC will look at during a compliance check so it is important that you can prove that any claim for motor expenses is reasonable. For a sample business mileage log feel free to contact us and we will be happy to supply a copy, free of charge.

  2. Alternatively the self employed can, if they wish, use the approved mileage allowance (AMAP) rates to claim a fixed rate per business mile travelled. This method is only available if the annual turnover of the individual's business is less than the VAT Registration threshold (currently £79,000 - If this is reached once the approved mileage allowance rates have been used then the mileage rate should continue to be used until the vehicle has been replaced).

What does the mileage rate cover?
The approved mileage allowance rate covers the running and maintenance of the vehicle. Therefore expenses such as fuel, oil, servicing, insurance, vehicle excise duty, repairs and MOT are all covered. The mileage rate also includes an element relating to the depreciation of the vehicle.

What other costs are allowable in addition to the mileage rate?
The approved mileage allowance rate does not include costs that are incurred during specific journeys such as parking, tolls and congestion charges. Parking fines incurred by employees during business travel are also allowable but any parking fines incurred by the owner of the business are specifically disallowable.

How much is the Approved Mileage Allowance rate?
Since 6 April 2011 the appropriate Approved Mileage Allowance rates have been as follows:-


Cars & Vans

 

On the first 10,000 business miles
per tax year

45p per mile *

On each additional business mile

25p per mile

Additional rate where car drivers
carry passengers

5p per passenger
per mile

Motorcycles

24p per mile

Bicycles

20p per mile


* Prior to 6 April 2011 the mileage allowance for the first 10,000 miles in a tax year was 40p per mile.

We hope that you have found this guide useful. If you would like some further advice or assistance please contact us.

 

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