Access to a car is a must for most businesses, meaning that travel expenses are one of the most common expenses. But you don’t have to go out and buy yourself a new car for your business. It’s perfectly acceptable to use your personal car for business use.

In this guide, we’ll explain how using your personal car for business works, including:

  • Can I claim tax relief for using my personal vehicle for business?
  • What counts as a business expense?
  • What vehicle costs can I claim?
  • How do I claim mileage?
  • What insurance will I need?
  • What if I’m self-employed?
  • Can I claim for vehicle wrap or decals?

Can I claim tax relief for using my own car for business?

You shouldn’t need to pay for business travel costs out of your own pocket if you’re an employee. If you have an employer, they should reimburse you for using your personal car for business. For things like fuel costs and wear and tear on your car. The reimbursements should be tax and NIC (National Insurance Contribution) free – you don’t need to claim relief yourself. 

If you’re self-employed, you can claim some travel costs as a business expense – like car insurance, fuel, parking and breakdown cover. Claiming tax relief like this means you can deduct the amount you’ve spent on business travel throughout the tax year and reduce it from your taxable income, leading to a lower tax bill. 

What counts as a business expense?

An expense is only classed as an allowable business expense if it’s exclusively for your job. This is where using your personal car gets a little confusing because you’ll have expenses that are for personal use as well. You’ll need to make sure your business use calculations are accurate for your tax return.

For example, you won’t be able to claim your personal insurance costs as a business expense because you’ll see the benefits of that insurance in your personal life. You can’t claim running costs to get from your home to your office – this is classed as a ‘non-business cost’. You also cannot claim for fines you incur on your business car.

But you can claim expenses for business travel, this includes pretty much everything you need to use your personal car for work like insurance, repairs, breakdown cover and more. Business travel, for example, is if you’re a solicitor and you need to travel to different locations to support clients. 

What vehicle costs can I claim for?

You can’t claim for separate running costs like:

  • Fuel
  • Electricity
  • Road tax
  • MOTs
  • Repairs

Instead, HMRC prices the relief per mile you’ve travelled with an approved mileage allowance payment (AMAP). AMAP rates are worked out like this: 

For the first 10,000 business miles in the tax year:

  • Cars and vans: 45p per mile
  • Motorcycles: 24p per mile
  • Bicycles: 20p

For each business mile over 10,000.

  • Cars and vans: 25p per mile
  • Motorcycles: 24p per mile
  • Bicycles: 20p

How do I claim mileage?

You can claim mileage from your taxable income. To claim, you’ll need:

  • Records of the dates and mileage of your business journeys (remember: this can’t include your journey from home to work but instead from client to client, for example)
  • The mileage for each vehicle type you’ve used for work (this is only applicable if you sometimes use different transport, like a car one day and a bicycle the next)
  • To take away any amount your employer pays you towards your costs (sometimes called a ‘mileage allowance’)

If you are employed, your employer will normally reimburse you for your mileage and make the tax claim themselves. You’ll still need to keep records of dates and mileage to give to them. 

If you’re self-employed, you’ll have to claim vehicle running costs when you complete a self-assessment tax return. 

What insurance will I need to use my personal car for business?

If you’re using your personal car for business purposes, you’ll need business car insurance in case something happens when using your vehicle for work. This is important because if you have an accident whilst you’re using your car for business, you won’t be insured without business-specific insurance.

Business use car insurance comes in several different classes, depending on what level of coverage you need. It’s usually split into three classes:

  • Class 1: for travel between different work locations,
  • Class 2: same as class 1, but it lets you add another driver to the policy,
  • Class 3: for long-distance travel, this class would be best for travelling sales workers or couriers.

Normally, your employer should cover the costs of business car insurance. If you’re self-employed, you can claim the costs of business car insurance as an allowable business expense. 

What if I’m self-employed?

If you’re self-employed and using your own vehicle, you can choose to claim your running expenses when completing your self-assessment tax return

You can claim individual running costs for business, including:

  • Vehicle insurance
  • Repairs and servicing
  • Fuel
  • Parking
  • Hire charges
  • Vehicle licence fees
  • Breakdown cover

Remember, you can only claim running costs wholly and exclusively business-related. The tricky part with this method is recording and reporting each individual cost accurately.

Alternatively, you can use “simplified expenses”. This method just lets you claim mileage on the normal AMAP rates. You might claim less money overall, but it will save you lots of time and hassle. 

Can I claim for vehicle wrap or decal on my personal car?

Of course. Wrapping your car or getting a decal is a great marketing tool for your business. As it’s a marketing tool, you can expense the cost of the wrap or decals.

Decal refers to images, graphics, or lettering printed onto your vehicle. Wrap refers to vinyl designs or colours printed on your vehicle. 

If you’re self-employed, decorating your car with wraps or decals should be classed as an allowable marketing business expense, as long as there’s no personal benefit from doing so. For example, if you print lettering or a business logo on your car, that’s quite obviously wholly and exclusively for your business. But if you’re not sure, you should ask a qualified accountant for guidance. 

If you’re a limited company owner, buying a vehicle through your limited company is a good option.

Manage your expenses with a simple accounting app

Financial management can be stressful and time-consuming when you’re self-employed. That’s why thousands of business owners use the Countingup app to make their financial admin easier.

Countingup is the business account full of small wins, with built-in accounting software, financial management and tax prep features. Countingup allows you to manage all your financial data in one place, at the tap of a button. With features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are. If you’re using your personal car for business use, you can track your expenses for this through the app too.

You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward! Find out more here.