Company vehicles are a normal expense for businesses. But you don’t have to go out and buy yourself a flashy new car. It’s perfectly acceptable to use your personal car for business use, 

In this guide, we’ll explain how that 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 decal?

Can I claim tax relief for using my own car?

As an employee, you should never be expected to pay for business travel costs out of your own pocket. If you have an employer, they might reimburse you for the costs of using business running costs. 

If you’re self-employed, you should be able to claim the amount as a business expense. 

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 a business expense if it’s exclusively for the purposes of doing your job. This is where using your personal car gets a little confusing because you’ll have expenses that are for personal use also. 

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. Similarly, you wouldn’t be allowed to claim running costs to get from your home to your office. 

You can claim running costs for business travel. This would include any travel that you need to do for your job. For example, if you’re a solicitor and you need to travel to different locations to support clients. 

What vehicle costs can I claim?

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. In order to claim, you’ll need:

  • Records of the dates and mileage or your work journeys.
  • The mileage for each vehicle type you’ve used for work
  • 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?

If you’re using your personal car for business purposes, you’ll probably need business car insurance in case something happens when using your vehicle for work. 

Business use car insurance comes in several different classes, depending on what level of cover 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 like these: 

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

Remember, you can only claim running costs that are wholly and exclusively for the purposes of doing business. The tricky part with this method is recording and reporting each individual cost. 

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

Can I claim for vehicle wrap or decal?

Of course, there are other uses for a vehicle than just travel. Some people choose to use their vehicles as marketing tools with “wrap” or “decal”. 

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

If you’re self-employed, then decorating your car with wrap or decal 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.

If you’re not sure, you should definitely ask a qualified accountant for guidance. 

If you have a limited company, you might also look at the option of buying a vehicle through your limited company.

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 current account with built-in accounting software that allows you to manage all your financial data in one place. 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. 

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.