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How can I recover business travel using my private car for my business?



It is not usually tax-effective to put petrol and diesel cars through a company.


Depending on the CO2 emissions of the vehicle, capital allowance rules mean that traditional petrol and diesel vehicles fall into either the main pool or special rate pool, with respective annual writing down allowances of 18% or 6% annually, on a reducing basis.


Petrol and diesel cars are excluded from the annual investment allowance and full expensing rules, and it’s also important to note that VAT paid on new vehicles is also not recoverable in your VAT return.


Except for fully electric vehicles, individuals are also heavily penalised by the taxable benefit of private use of a company car.


Most business owners find it preferential to buy their car personally and claim mileage for business use. As with expenses in general, for the travel expense to be allowable, it must be wholly and exclusively for the purpose of the trade.


The rules are that you should keep records of who you visited, the reason for the visit, and the mileage to and from the destination. This should also be from the usual place of work.


It is advisable to keep records routinely, for example, a monthly spreadsheet, however for business owners and employees that routinely travel for business, there are numerous apps available for capturing business mileage, at a relatively affordable price, and most market-leading cloud accounting software providers have add-on applications for capturing business expenses, including business mileage.


The HMRC mileage allowance payment rates for vehicles are as follows:

 

Petrol and Diesel Cars

Motorcycles

Bicycles

The first 10,000 miles

£0.45 per mile

£0.24 per mile

£0.20 per mile

Subsequent mileage

£0.25 per mile

£0.24 per mile

£0.20 per mile

 

As you can calculate, these rates more than cover the fuel cost of an average vehicle. This is intentional, as the rates also recognise an element of running costs.


Let’s look at some examples:


Example 1: Geoff is required to travel to meet his customers and typically does 5,000 business miles annually. He drives his personal diesel car.


Impact: Geoff’s mileage expenses will total 5,000 miles at £0.45, totalling £2,250.00.


Example 2: Sarah is required to carry out annual business mileage of 12,000 business miles. Sarah also uses her personal diesel car.


Impact: Sarah’s mileage expenses will be made up of 10,000 miles at £0.45 per mile (£4,500), and then the remaining 2,000 miles at £0.25 per mile (£500), totalling £5,000.00.


Further points:


·       Other than these mileage allowance payment rates, no other vehicle expenses are allowable for private vehicles, including capital allowances.


·       Your usual commute from your home to your normal place of work is not an allowable business expense.



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