Self Employed - Using personal car for business travel / fuel etc

[Matthew_28]

Hello Everyone,

I am currently self employed /sole trader and have been using my own personal car for business use (travelling to/from clients, sites etc).

(Also note there is still £3000 of finance on this car - so could a proportion (business use) of the interest be offset against tax liability?)

Is the best way just to keep a mileage sheet every month itemising dates, number of miles, travel location where/to etc and then charge at 45p per mile for the first 10,000 miles? and then withdraw the £sum from the business bank account into my own personal bank account tax free?

Not sure of the best way to do this, so far I have been filling up with fuel as and when required using my business debit card and keeping the receipts - but someone has recently told me this is not allowed.

I've also paid for my annual car insurance and road tax using my business debit card. Would the best way to rectify this be by me paying back into the business bank account (out of my own personal bank account) for all the fuel, car tax, and insurance, and then take ouf 45p per mile for every business mile?

Otherwise would HMRC see this as drawings?

Hopefully I may end up better off.

Thanks for any help / comments.

Regards
Matt

 

[CMYK]

If you're claiming the 45p per mile allowance then this includes road tax, insurance, depreciation etc. You can't claim for these items in addition to the mileage allowance.

 

[Matthew_28]

Sorry, I haven't explained it clearly enough.

At the moment I have paid for all the fuel, car insurance and road tax on my business debit card. I am proposing to pay back the amounts paid for fuel, road tax, and car insurance from my personal bank account into the business bank account.

Then add up all my business mileage and pay a £sum from my business bank account back into my personal bank account based on 45p per mile.

Would this be the right way to do it? Best method for tax purposes?

Cheers
Matt

 

[Truemanbrown]

Basically, as a sole trader you have two choices over how to account for use of your private vehicles for business:-

1. You can claim for all the running costs (i.e. petrol, tax, insurance and repairs) and claim a capital allowance on the cost of the car, then deduct an amount for private use;

2. As you have said, you can claim a mileage allowance on the business miles that you undertake.

Whichever route you take, you will need to keep detailed mileage records either to determine the private use proportion of the car or the actual business miles you undertake. You must the same option through the life of the vehicle and can only change on the change in vehicles.

With regard to the petrol and other items being paid from the business account, there is no problem with this because if the mileage allowance option is taken the petrol and other expenses will go to your drawings.

 

[MyAccountantOnline]

Matt you need to do some calculations to see which is best for you ie gives the largest tax saving ie to claim 45p per mile for the first 10,000 miles pa then 25ppm thereafter or to claim the proportion of your total motoring expenses which relate to business use ie fuel, insurance, repairs, interest on finance and capital allowances etc. (assuming your turnover is below the VAT threshold currently £73,000)

 

[CMYK]

Nicola beat me to it and as she's the accountant I'll bow out

 

[Matthew_28]

Thank you all for your helpful replies.

I've just checked my accounts as follows:
Started trading in January 2011.

Turnover to date approx £33,000
Fuel = £2,700
Road tax = £260
Car insurance = £600
Car annual service = £160

I have travelled approx 9,500 business miles.

So it would appear £0.45p x 9500 = £4,275 would be better than £3,720 already claimed?

Not sure if i've got that right.


P.S. Can I claim for parking tickets/charges separately? (not fines).

P.P.S. What is a capital allowance? is it to contribute towards depreciation of the car?

Cheers
Matt

 

[Matthew_28]

I think the above is right?

Cheers
Matt

 

[Truemanbrown]

Thank you all for your helpful replies.

I've just checked my accounts as follows:
Started trading in January 2011.

Turnover to date approx £33,000
Fuel = £2,700
Road tax = £260
Car insurance = £600
Car annual service = £160

I have travelled approx 9,500 business miles.

So it would appear £0.45p x 9500 = £4,275 would be better than £3,720 already claimed?

Not sure if i've got that right.


P.S. Can I claim for parking tickets/charges separately? (not fines).

P.P.S. What is a capital allowance? is it to contribute towards depreciation of the car?

Cheers
Matt

Firstly, you can claim for parking tickets and tolls separately.

Second, capital allowances is a contribution towards the cost of an asset. The allowance you can claim depends of emission level of the car:-

>160g of CO2 per Km - You get an allowance of 10% of the remaining balance of the cost of the car
Between 110g and 160g of CO2 per km - you get an allowance of 20% of the remaining balance of the cost of the car
<110g of CO2 per km - 100% allowance in year of purchase of new car.

 

[Matthew_28]

Thanks everyone, anyone got anything else to add?

Cheers
Matt

 

[Matthew_28]

Hello again,

I have just totted up all my business mileage sheets from the beginning of January this year and found I have done 12,357 miles (to be honest probably more) so if I understand correctly I could claim £0.45p for the first 10,000 miles (£4500) and then £0.25p for the remaining 2,357 miles (£589.25) = £5,089.25... is this correct?

So far out of my business bank account I have paid for the following:

Fuel = £2700
Road tax = £260
Service = £160
Car insurance = £600
Repairs = £50

Total = £3,770 + capital allowance? for a Focus ST 2.5L (59reg).

Would I be better paying this money back into the business bank account and then charging the mileage option? I assume this is the better option to offset legitimate business expenses against tax due? (limiting tax liability?)

Thanks for your help.

Cheers
Matt

 

[Matthew_28]

anyone?...

 

[Truemanbrown]

Hello again,

I have just totted up all my business mileage sheets from the beginning of January this year and found I have done 12,357 miles (to be honest probably more) so if I understand correctly I could claim £0.45p for the first 10,000 miles (£4500) and then £0.25p for the remaining 2,357 miles (£589.25) = £5,089.25... is this correct?

So far out of my business bank account I have paid for the following:

Fuel = £2700
Road tax = £260
Service = £160
Car insurance = £600
Repairs = £50

Total = £3,770 + capital allowance? for a Focus ST 2.5L (59reg).

Would I be better paying this money back into the business bank account and then charging the mileage option? I assume this is the better option to offset legitimate business expenses against tax due? (limiting tax liability?)

Thanks for your help.

Cheers
Matt

Yes, it does look like that the mileage allowance option is best.

You will only be able to claim 10% WDA for capital allowance on the Focus as well as deducting a proportion for private use if you used the other option.

 

[Will-man Rodders]

I recall my accountant advising me that I could not chop and change between the two methods of claim unless I also changed my car.

So if I chose to claim 'mileage allowance' then I would also have to use the 'mileage allowance' claim system for ever -- until I changed my car. When I changed my car I would then need to choose again between 'mileage allowance' and 'actual costs basis', and whichever I chose I would be 'stuck' with that method until I changed my car again.

I can't confirm or deny whether this is strictly correct. Hopefully someone more knowledgeable will confirm or deny this statement.

 

[Scalloway]

Yes you have one chance to pick your method for claiming. More details here

http://www.hmrc.gov.uk/manuals/bimmanual/bim47701.htm

Taxpayers can only use the mileage rate basis if they apply it consistently from year to year. They can only change to or from an 'actual' basis when a vehicle is replaced.

 

[Truemanbrown]

I recall my accountant advising me that I could not chop and change between the two methods of claim unless I also changed my car.

So if I chose to claim 'mileage allowance' then I would also have to use the 'mileage allowance' claim system for ever -- until I changed my car. When I changed my car I would then need to choose again between 'mileage allowance' and 'actual costs basis', and whichever I chose I would be 'stuck' with that method until I changed my car again.

I can't confirm or deny whether this is strictly correct. Hopefully someone more knowledgeable will confirm or deny this statement.

That is correct!!!