When you’re self-employed, every penny counts, and effectively managing your costs is key to maintaining a profitable business. A number of people talk to me about the use of their car for self-employed work especially if they are on tour.
This is an article in our knowledge base that goes through it all, the first bit is if you are employed and then it goes on to self-employment >> https://bit.ly/439aMZ6
The key things to point out are:
1. The mileage allowance is to cover all the costs of the car for the year not just the fuel. So it covers insurance, DVLA fee, maintenance & repairs, tyres, car wash etc. Not sure the last time I washed my car.
2. Parking costs are not part of the car cost as the only reason you are parking the car (or congestion charge) is because you are driving somewhere for your self-employed business.
3. You must keep a mileage log of self-employed mileage travelled you cannot just pluck a figure out of the air saying “Oh I did about 1000 miles” or “95% of the mileage I did in the year was for my self-employment and I think I did 8000 miles”. Keep records whether it is an app like Tripcatcher or Mile IQ, or an exercise book of trips that you then put into an Excel spreadsheet as part of your electronic bookkeeping.
4. The purchase costs of the car is included in the mileage rate. You cannot claim capital allowances on the car or the lease/PCP payments.
5. One main thing to remember is that you cannot swap the method you use each tax year or within that year unless there is a significant change in circumstances – which will mainly be a change in car.
6. If you do decide to use the actual cost method of costs for the car, this method involves keeping track of and deducting all costs associated with the business use of the vehicle. You need to keep records of all costs related to your vehicle. These costs include but are not limited to fuel, repairs, servicing, MOT, insurance, vehicle tax, and cleaning.
Then keep a detailed log of all business-related journeys, noting the mileage for each trip and also get hold of the actual mileage the car has been driven in total in the tax year irrespective of who drives the miles under your “ownership”.
A quick example…
So if you drove 1500 self-employed miles out of a total of 3690 miles, you can claim 40.65% of the running costs against your self-employed income. If you use the actual cost method and you own the vehicle, you can claim capital allowances on the cost of the vehicle applying the business proportion calculated above, and apply that to the allowable writing down allowance for the vehicle’s CO2 emission.
It can get complicated…
All this gets very muddled if you use cash accounting for the basis of your self-employed accounts, and then use the actual cost method for the car cost. Will save that for another time.
While the Actual Cost method can be more time-consuming than the simpler mileage rate, it can sometimes result in higher deductions, especially for vehicles with high running costs or those used primarily for business purposes.
Why you want one of these cars gee – it’s hard enough earning at the moment as a musician or actor – why give it to the car garage.
