Motor Expenses as a Consultant
Self employed consultant with private practice
As a self employed consultant there are two methods available to claim motor expenses.
- Method 1 – to claim a mileage rate of 45p a mile for your business miles, reducing to 25p per mile after 10,000 miles.
- Method 2 – to keep records of all your motor expenses for any vehicles that you use for your business and claim the business percentage of these costs. If you use this method you can also claim for something called Capital Allowances, which is effectively an allowance for the depreciation on the vehicle.
Note that the mileage from from your home to the hospital or private hospital will be considered by the Revenue as private mileage and not business mileage.
If I chose method 2, how would this work?
So, as an example, if you used your car 50% for business and 50% for private use, you could claim a tax deduction on the costs as detailed below:
Example Total Annual Running Costs
Road tax: £120
Annual service: £800
Less 50% for private use: £2,547
Allowable expense £2,548
How do Capital Allowances work?
You can also claim capital allowances on the cost of the car. The rate of capital allowances you can claim is dependent upon the CO2 emission level of your vehicle. The amount you can claim can range from 100% to 6%. A 100% capital allowance claim accelerates the available tax relief.
To qualify for 100% first year capital allowances, there is an upper CO2 emissions limit of 50 g/km which was introduced from 6 April 2018 and will last until 2023. The car must be bought new. There is a wide range of vehicles including many luxury vehicles which qualify for the 100% allowance. For a consultant with a top rate of tax at 40% who would use the car with 50% private use the following tax savings would be made:
Based on: BMW i3 Electric 12 ah Auto.
Purchased: 2019/20 Tax Year
List price: £35,125
Capital allowances claim: £35,125, but restricted to 50% business use, therefore tax relief £17,562 at 40% tax plus 2% NIC.
Tax saving in year of purchase: £7,376 (42% x £17,562)
This means that, after tax, cost of the vehicle is an effective £27,749.
The following link shows the current 285 vehicles that qualify:
Which method is best?
If you are buying a car which you are using mainly for business and doing a large amount of business miles, then method 2 (the Capital Allowance Claim) usually gives a higher tax relief.
How we can help
In both Method 1 and Method 2 you need to know the level of your business mileage. We ask clients to keep mileage records to enable us to do calculations for both methods. We determine which method is best for you and therefore help keep your tax to a minimum.