By Jamie Wooldridge on Small Business – Advice and Ideas for UK Small Businesses and SMEs
Question:
I am in business as a sole trader and need to purchase a new vehicle. Although I have the funds to purchase one outright, I want to buy the vehicle in the most tax efficient way. Please can you advise what would be the best option. In particular, if I choose to get a vehicle using a PCP, can I treat the entire monthly payment as an expense to reduce profit and hence tax?
Answer:
As a sole trader you have two different options for how you treat any car used in the business. You can either claim ‘simplified mileage expenses’ or claim the actual costs of business usage of the vehicle.
Simplified mileage expenses
As the name suggests this is a straightforward method of claiming for the cost of usage of the vehicle. You can claim 45p per mile of business usage for the first 10,000 miles in any year, and 25p per mile thereafter. It’s worth noting that business mileage excludes travel from home to your usual place of work. Records should be kept documenting the amount of mileage being claimed.
The 45p per mile rate is intended