Motoring Discussion > Best way to buy/run a car while self employed Miscellaneous
Thread Author: teabelly Replies: 21

 Best way to buy/run a car while self employed - teabelly
At the moment I've started into self employment as there are bog all jobs. So far it is sporadic and part time. I was wondering how many miles you need to do to justify having a car entirely bought and paid for by any profits of the self employment business ie before the taxman gets his cut of any income?

On the 40.5 p a mile scale for mileage it wouldn't pay at all to buy another car but can you have one entirely for business use that could be bought and paid for (I was think of leasing with maintenance) entirely in this way? I know with mixed use you can have apportionment but that would be a right pain so I'd rather have something entirely separate. Also will the tax man believe you if you say it is entirely for business use if it lives at your home address?

Could you return a car to the road for solely business use and get the self employed profits to pay for it? My every day car I still have but it needs work to get it running again. Would that be something that could be done under this tax efficient umbrella? It's not very economical on fuel though and is 20 years old so I wonder whether there would be a problem? I also have a classic that is very cheap to run but again needs work to make it road worthy. I think the leasing option is the most sensible as it would be a fixed cost and there would be no BIK and fewer complications.

The mileage route claim would be the simplest of course but with the ever rising cost of fuel it will start not to cover even the fuel costs. And I haven't found a good way of tracking your business mileage with a doodad either.
 Best way to buy/run a car while self employed - Alastairw
Like any answer to this type of query the true answer is 'It depends'!

Basically you can only claim for the actual business cost ie: if you reserve a vehicle 100% for business use you can claim all of the running costs, as it is your choice - you may not have much of a profit, and be sure to keep accurate mileage logs as HMRC may well ask to see them.

What you do have to watch out for is the jealous inspector. A few years back HMRC objected to an optometrist client using a BMW 535i for his business, as 'an Escort would do the same job'. The inspector (very young IMO) was relying on an ancient case involving a farmer using an Alvis on the farm - soon knocked that argument down.

If you want any more detailed advice feel free to email me off board. If I dont know the answer I probably know someone who will.
 Best way to buy/run a car while self employed - Runfer D'Hills
Would a van be any use to you? Friend of mine has a whizz bang super sporto model of the Astra van and he can claim all of its costs back against his business because it's a van apparently. Goes like fertiliser off a hot shovel too.
 Best way to buy/run a car while self employed - MD
And about as much room as a lunch box.
 Best way to buy/run a car while self employed - teabelly
Not sure I'd want a van! Was thinking of either a new panda/punto leased. Don't need anything fancy but those skoda yeti things looked quite good.

Shame volvo aren't doing that polaris as if I had massive profits I'd waste some of them on one of those... bet HMRC would be a bit annoyed if I got a brand new skyline GTR35 :-) Need a lot more profit to afford one of those though!
 Best way to buy/run a car while self employed - RattleandSmoke
I don't do all my accounts so I cannot give you the exact answer but it is taxable. I say 80% of my car use is for business so I can claim all that against tax. However for next year I think I will say 70% business use as I have been using it a bit more for personal use of the past couple of weeks.

 Best way to buy/run a car while self employed - Stuu
I claim about 80% of all my car running costs, just go see an accountant, get some quick advice. A good accountant is worth every single penny. Stick a desk in a room and store your work files there and you can set £250 a year against tax, which I never knew until my accountant asked some questions.
It is quite acceptable to never earn enough to pay income tax so long as your tax return is honest and my accountant is invaluable in making this happen.

Tax man doesnt have to believe you, so long as its true and the figures stack up.

Splitting the business/private use is easy as so long as you dont under estimate your personal use, they dont care. They only care if you claim too much, not too little.

Last edited by: Wilberstuforce31 on Wed 9 Feb 11 at 18:59
 Best way to buy/run a car while self employed - RattleandSmoke
It personal/business use is quite hard to quantify, you could write all the milleages down but there is no requirement do this and they they can see by the milleage on your car if you're lying. It is how they get taxi drivers and some have been caught by it. They claim to work part time yet some how rack up 100k a year.

 Best way to buy/run a car while self employed - smokie
Keeping track of business miles isn't that hard is it Rats? I used to do it in a spreadsheet.

I know I'm old skool, but I also found it quite easy to work out the true proportion of business vs private - just look at the odometer on 31 March each year and write down the mileage, subtract last year's reading to get your mileage this year, then using the business mileage spreadsheet work out what proportion was business.
 Best way to buy/run a car while self employed - RattleandSmoke
Yep could very easily do it if I wanted to, the milleage concerned are so low though I never bother should really get into the habit of doing it though.

There are a lot of gray areas though, I have covered 18 miles today going to Stockport and back with one slight detour and got a mixture of stuff for business and some personal stuff like trainers. Now is that 100% a business trip? But then if it wasn't for the business stuff I could got my personal stuff a lot more locally.

 Best way to buy/run a car while self employed - Espada III
As a partner in my firm I am technically self-employed. We took the decision that partners would buy their cars with their own money but all the running expenses would be met by the firm. The accountant makes a judgement each year as to what proportion of the running costs can be offset against tax. As my partner and I have wives with family cars the vast majority of our mileage is 100% business and so we claim almost 100%.

If I was a sole trader, as the OP suggests he is, then of course he can lease a car on a business lease or a PCP and the accountant can apportion part of the cost and running costs against tax. The 40ppm doesn't really come into it for a self-employed person.

Cars were the main reason why we did not incorporate by remained a partnership.
 Best way to buy/run a car while self employed - Runfer D'Hills
When I was self-employed I used to charge my business 40p a mile for the first 10,000 business miles in a tax year and 25p a mile for any business miles exceeding that. At the time this was accepted as fair by the Inland Revenue. I calculated my business mileage by keeping a log of business journeys in a book in the car. So I'd take an odometer reading first thing in a morning and on completion of my day's work another reading and record the business miles run with a summary of locations visited written alongside. By this method I could accurately calculate the total number of business miles run in any tax period and if required justify them.

I used to do quite a high mileage so the tax savings were significant. I could also claim part of the maintenance costs back against tax by calculating what proportion of the car's total mileage was for business as a percentage of its total miles in a given tax year and proportionately allocating that percentage of the maintenance costs ( servicing, tyres etc ) to business costs.

In addition, being VAT registered I could also over and above that claim back the proportionate VAT element of the maintenance costs and the VAT element of the actual business fuel costs ( as opposed to that of the mileage rate applied )

More or less, I could just about offset the real costs of the car, provided I didn't buy an expensive vehicle.
 Best way to buy/run a car while self employed - Runfer D'Hills
Edit above - the thought has occasionally occured to me that despite years and years of stupidly high miles in turbo diesels that I've never had one develop a turbo related problem. I wonder if the habit of sitting with the engine idling for a minute or so at the end of a working day while I fill in my daily mileage log has helped their longevity.
 Best way to buy/run a car while self employed - Falkirk Bairn
Best way to run a car?

You are starting at the wrong end.

Self-employed means lots of different things - unstable income, no work, bad debts.........

You need to sit down and look at your financial position

How much cash do you have? - enough to live on for 6-12 months (if you are careful) or are you paying the rent/mortgage and the minimum to debts and loans?

Taking on a £99 -£150 /mths car PCP might seem OK in the first heady days and weeks of self-employment. Break the contract and the Penalty charges are BIG (Thousands) and do not come in easy installments!!

I made £3,000 18 years ago in my first month of self employment - 100 items in short supply - bought @ £100 and sold for £130. It never was that easy ever again.

Easiest plan is modest car and charge your accounts with 40p for 1st 10,000 miles - it is taken as expenses and therefore is not liable to tax - you pay car, petrol, repairs, insurance etc.

In 6 months when things have settled down / gone into employment look again.

Bye the way what are you working at in your self employed state?
 Best way to buy/run a car while self employed - teabelly
I know what self employment means. It's like unemployment but with tax breaks :-)

I'm looking at doing web stuff and product photography. I have only the one client so far. The car purchase would be something if the business mileage increased significantly. I'm not doing much at the moment but there's scope with stock photography to do bigger miles going off to places to shoot for stock. Not sure whether HMRC would see that as a big enough justification for going on trips though... was a slightly idle thought. Product photography for clients would be.

Keeping track of business mileage is the plan for now really. I was just considering possibilities and having a bit of blue sky wishful thinking :-)
 Best way to buy/run a car while self employed - smokie
WRT recording business mileage, I've always recorded mine even though I was PAYE. Lucky I did, as two separate years the taxman queried my tax return, and asked for details of my trips.
Last edited by: smokie on Wed 9 Feb 11 at 21:27
 Best way to buy/run a car while self employed - Bellboy
first rule once self employed
get receipts for everything
this way you can cut the wheat from the chaff
 Best way to buy/run a car while self employed - spamcan61
Having finally landed myself a 9 month design services contract in the UK I'm treading a similar path to the OP I imagine; this page from the business link web site gives a lot of info on business use of cars and tax, although obviously there are others on here with actual practical experience of how this works.

Meanwhile I'm in the umbrella company / sole trader / private limited company dilemma, and finding an accountant.
 Best way to buy/run a car while self employed - Alanović
I've done both umbrella and limited company.

I'll never go ltd again after my experiences with the revenue and the vat man.

And I worked out that the difference in monies I brought in were infinitessimally between the two methods, and that my cash flow was far easier under umbrella. Admin was a thing of the past also.

Umbrella every time for me.
 Best way to buy/run a car while self employed - spamcan61
I used an umbrella company while I was working out in Stockholm last year, it was a complete nightmare, no visibility of exactly what money was being deducted for what reason etc. ..and charging 3% of my gross for the privilege.

On the other hand I do know guys who've been doing it that way in the UK and have not had problems.

For sure the limited company route is most hassle, it's a matter of working out if it's worth the extra hassle or not financially.
 Best way to buy/run a car while self employed - Iffy
...Having finally landed myself a 9 month design services contract in the UK...

So is it farewell to the island?

 Best way to buy/run a car while self employed - spamcan61
>> ...Having finally landed myself a 9 month design services contract in the UK...
>> So is it farewell to the island?
I'm not on the island guv, I'm on the mainland pretty much opposite the Needles, although a bit too far inland for a sea view :-/.
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