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Motor Expenses: Expenses Claim or Mileage Claim?

Did you know that you can claim motor expenses that are related to using your car for legitimate business journeys? Either the expenses claim method or mileage claim method can be used to claim motor expenses against business profits, thereby reducing the overall tax bill. But which method is best for tax? Read on to find out!

Expenses Claims vs Mileage Claims

The expenses claim method entails calculating the total motor-related costs of the vehicle - including fuel, repairs & maintenance, road tax, insurance, MOT, and parking - and deducting the percentage of costs made from personal use to get the business-related percentage of your total costs. The business-related percentage is what you can then claim back. Conversely, a mileage claim can be done by multiplying the business mileage with the government allowance of the vehicle per mile - which varies depending on the type of vehicle.

Mileage Rates

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Be sure to not include journeys to and from work from home when recording business mileage as this does not count as a business journey, contrary to popular belief!


Claiming VAT on Motor Expenses


When it comes to claiming VAT on motor expenses, you need to be aware of the added complications this comes with. You have to use the expenses method if you are a sole trader and registered for VAT. Either method can be used by limited companies, but VAT can only be claimed on fuel if limited companies choose the mileage method. There are technical complications when claiming VAT on fuel so it is advised to seek guidance from an accountant (such as us here at Kubed Solutions!) to ensure the correct claims are being made.


Claiming Tax Relief on the Purchase of a Vehicle


If the expenses method is used, a percentage of the vehicle’s yearly purchase value can be claimed as a capital allowance. This percentage is based on the emissions and nature of the vehicle. Using the mileage method, however, means you cannot claim anything against the vehicle purchase due to depreciation being factored into the pence per mile.


For limited companies, the vehicle counts as a company car so there are extra rules that come with claiming a proportion of the vehicle value which require their own assessment. Limited companies tend to choose the mileage method and keep the vehicle in their own name. If in doubt seek guidance from an accountant on whether or not to include the vehicle as a company car.


Tips for Claiming Motor Expenses


There are some easy steps you can take to make sure you choose the right method for claiming tax on motor expenses in the future. These include:

  1. Understanding the business journeys that apply to you;
  2. Ensuring you are accurately recording your business mileage - regardless of what method you choose;
  3. If you use the expenses method or your business is VAT registered, make sure you save all evidence of fuel receipts and any other relevant costs;
  4. Being aware that the method you decide to use depends on the proportion of business mileage you do in comparison to personal mileage; and
  5. Recording your mileage for a few months before preparing comparison calculations for the tax relief - will help you to accurately calculate both methods!


If you require any further guidance on choosing a method to use to claim back tax relief for motor expenses, or any other accounting needs, we offer free 30-minute consultations. Be sure to get in contact with us so call us on 07762657277.

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