Using Your Personal Car For Work ?- The implications.

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Are you using your personal car for work? 

No matter the distance, whether you’re travelling from Shrewsbury to Wolverhampton or from Mid-Wales to Bristol, you can claim something back on these travel expenses. 

According to the findings of a study conducted by the Energy Saving Trust, it is estimated that 14 million privately owned cars are being used for work-related purposes (2016). This group is commonly referred to as the "grey fleet.  

Because company cars are considered "benefits in kind," which results in tax liability for the employee or director and national insurance contributions from the employer, it is becoming more financially advantageous to use your own car for work and claim back your mileage cost. 

However, if you are interested in an electric or ultra-low emission vehicle, a company car may still be an option for you.

This is because HM Treasury recently announced that pure electric vehicles will only pay 2% benefit in kind (BIK) beginning in the 2022/23 tax year and currently forecast through to 2024/25. 

Read on to find out the answers to some frequently asked questions on the implications of using your personal vehicle for work.

Can I use my own car for business?

It’s possible to use your own personal vehicle for business purposes. If your employer asks you to do this, they’re responsible for reimbursing you for these travel expenses.

Their reimbursements don’t include costs from travelling to or from work unless it’s a temporary location.

If you’d prefer to use your own car over a company car, this is an exceptional circumstance worth raising with your employer.

Can I claim car expenses from my business?

The short answer is yes – you’re entitled to tax relief for travel costs you incur by performing your job. It may be that you have to travel to and from the office to visit customers using your bicycle, van, motorbike or car.

You can claim tax relief on the approved mileage allowance payment (AMAP) which outlines the maximum amount per business mile you can receive.

In the instances where your employer doesn’t cover these costs, you may be able to claim a deduction from your income. 

The AMAP covers the owning and running of your vehicle and doesn’t allow you to claim separately for repairs, road tax, MOTs, electricity, fuel, or repairs.

It’s worth noting that you can only claim tax back if you’re a registered taxpayer. 

How much per mile can I claim for using my own car?

* Where you carry a passenger an additional 5p per mile can be claimed.

The AMAP covers the costs of running and maintaining the vehicle, such as fuel, servicing, oil, insurance, repairs, vehicle excise duty and MOTs, as well as depreciation.

You can be reimbursed for your business mileage at a rate of 45p per mile in your car for the first 10,000 business miles in the tax year and 25p for each mile thereafter.

The business mileage rate is 24p for motorbikes and 20p for bicycles no matter the number of miles.

These rates are the only tax-free way to get reimbursement for your business miles.

If you have more than one job where the employers aren’t connected, you can have a 10,000-mile 45p limit for each job you hold.

Otherwise, you have only a 10,000-mile 45p limit across all jobs under the same employer.

There are certain things to keep in mind when claiming for using your own car.

First, make sure you keep records of the dates and mileage of your business journeys and add up the mileage for each vehicle type you’ve used for work.

Be sure to subtract any mileage allowance your employer already pays you towards these costs.

If you’re paid against petrol receipts or receive a fixed sum each month, then these payments are taxable and subject to you making a claim for tax relief based on the 40p/25p rates above.

Can I be forced to use my own car for work?

An employer is well within their rights if they request you to use your own car for work purposes.

Yet ‘force’ is a strong word. If, for whatever reason, you feel uncomfortable using your own car for business, make sure you raise it with your employer.

Remember, you don’t get it if you don’t ask! Your employer may be able to supply you with a company car instead.

It’s important to note that, when an employer requests you to use your own vehicle, they assume responsibility for ensuring you have the right licensing, insurance and servicing.

They are also required to ensure your vehicle complies with health and safety laws by conducting risk assessments. 

Company car vs car allowance: which is right for me?

According to the RAC, choosing a cash allowance is the more flexible option, since this cash can be used for a variety of purposes, or to finance your dream vehicle. If you’re looking for freedom or your own set of wheels, cash can be the more attractive option.

Unless your commute is very short, a company car scheme can offer fantastic savings potential as well as freedom from unexpected costs.

What is classed as business mileage?

The taxman (HMRC) won’t believe you use your car 100% for business use.
Why? Because on your way to visit a client, you might stop off and get a sandwich.

You might swing by the shops to get some garlic bread to go with the pasta you cooked for dinner. If it’s a nice day, you might stop off by the park to go for a walk.

You get the idea.

So how do you work out how much you can claim for self-employed car expenses? There are two ways:

The Hard Way: Add Everything Up
If you choose this way, you’ll need to add up the total costs of running your car and work out the percentage of business usage. Yes, this can take longer, but it could also save you money on tax. The running costs of your car include:

- MOTs
- Services
- Fuel
- Insurance
- Maintenance & Repairs
- Any hire costs (if you’re hiring the vehicle)
- Capital allowances on the first cost of the car

The Easy Way: HMRC Simplified Expenses

If you choose this way, you’ll simply add up how many business miles you’ve travelled and then apply the flat rate per mile rate to it:

If you have already submitted a claim for a capital allowance for your vehicle, you will not be able to use this simplified expense calculation. This method of claiming is also inapplicable if your vehicle was manufactured specifically for business use (like a taxi or driving instructor car).

Once you make the decision to use this method of claiming, you will not be able to change your mind and use the "add everything up" method again until you have purchased a new vehicle.

How do I work out the personal and business mileage of my car?

Now you’ve decided how you’re going to claim, you need to work out the business to personal % use of your car. So how do you do it? A mileage log.

Now a word of warning, if you’ve not heard of this before you’re going to think it’s an absolute pain. And, it is. But it’s one of those things that you’ll need to get into the habit of doing because if the taxman requests the information, you need it.

Keeping the taxman happy is important, remember.

How do I keep a mileage log?

Each journey, you need to note the:

• Date
• Miles travelled
• And purpose of the trip

How you do that is up to you. You may wish to print out a quick table and fill it in by hand:

TIP:  Use a mileage app 

According to G2, these are the best free milage tracking apps/software

• Zoho Expense
• Everlance
• G2 Deals
• TripLog
• Timeero
• ExpensePoint
• Veryfi Receipts
• MileageWise
• Selenity Expenses

What is a mileage claim calculator?

Now you’ve got your total miles travelled, you need to work out how much to claim. Here’s an example of how you’d do that using each possible claim method. Simply replace our figures with your own.

Add-Up Method:

10,000 miles per annum.

Split into 3000 personal & 7000 business.

= 30% personal and 70% business use.

Total costs of running the vehicle per year: £4500

70% of £ = £3150.

Simplified Expenses Method:

7000 business miles per annum.

7000 x 45p = £3150.

Additional Car-Related Costs

Parking
If you’re heading into town to meet a client, keep your parking fee receipt! 60% of sole-traders don’t keep receipts worth under £10, but remember they all add up.

Toll Fees
Going through the M6toll or another toll road? Keep the receipt! You can claim 100% of the cost if the trip was business-related.

So Which Method Is For You?

The simplified method is much easier, yes, but could cost you more. If you’ve got a car that’s expensive to run, you’re going to be losing out on money.

The best way to know what to do is to speak to your accountant.

The information in this article is a  guide to use as a starting point, but there’s no substitute for tailored advice specific to your business and circumstances. Always check with a qualified accountant. 

There are many implications of using your personal vehicle for work which are primarily related to tax relief. Follow this guide when talking with your employer or claiming your business journey expenses.