Herald Series Tax Column 411

Q. I cover a lot of miles as a self-employed businessman and really need a decent car. I have just bought a £30,000 saloon and had expected to have a huge reduction in my next tax bill. My accountant has told me that I cannot claim any depreciation. This cannot be right can it?

A. You will be entitled to tax relief on part of your motoring costs, but the amount will depend on your circumstances.

The first thing to consider is what proportion of your mileage is business related. If you are going out to see clients or the like, that should not be a problem, but if you are travelling to the same location each day, this will probably be treated as non-business in nature.

If you are undertaking genuine business journeys, then there are two ways in which you can claim relief. The first is quite simple (for smaller businesses) and involves claiming a fixed rate per mile (40p for the first 10,000 miles). This figure is meant to account for all running costs. Alternatively you could keep track of all of your costs for the year and claim for the percentage that relates to the business (effectively excluding all private trips from any claim). With this method you would claim separate capital allowances (similar to depreciation).

The bad thing about capital allowances on expensive cars is that they are severely restricted, but after a while or on the change of the vehicle, you would get the remaining relief as appropriate. Whilst you may not get the immediate tax savings that you hoped you, I would be surprised if you could not make some impact on your tax bill.

Date of Publication::

Source of Publication:

8 October 2009

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