Can I Put Car-Related Costs Through My Business?

Short answer: yes — to some extent — but only the business proportion, and subject to rules. Whether you’re self-employed, a director of a limited company, or an employee using a personal car for work, there are criteria, methods, and limits set by HMRC.

Let's break it down below.

Self-employed / Sole Trader

If you run your business as a sole trader, you may claim motoring expenses as allowable business costs, subject to the principle that the cost must be “wholly and exclusively” for business use.

A) Two Main Methods: Simplified (Mileage) vs Actual Cost

You cannot use both for the same vehicle — once you choose, you must stick with it for that vehicle.

• Simplified / flat-rate mileage method: You claim a fixed pence-per-mile rate for business journeys. This covers all running costs (fuel, servicing, insurance, depreciation, etc.). You don’t separately claim those costs. Current rates are: – 45p per business mile for the first 10,000 business miles – 25p per business mile thereafter 

  Example: If you drive 11,000 business miles in a year, you could claim (10,000 × 45p) + (1,000 × 25p) = £4,750.

  
  

• Actual cost method You track all vehicle costs (fuel, servicing, repairs, insurance, vehicle tax, MOT, etc.) and then claim the proportion that relates to business use based on mileage or usage records. You may also claim part of the depreciation/capital allowances on the vehicle. This method is more administratively heavy but possibly more generous if your running costs are high.

  
  

Which method is better depends on your usage and cost profile. Many small businesses prefer the simplified method for ease.

B) Capital Allowances and Buying the Vehicle

If you purchase a car through the business (or as part of your business assets), you cannot simply deduct the full cost in one go (unless certain conditions are met).

Instead, you claim capital allowances (writing down allowances).

• Cars with zero CO₂ emissions may qualify for 100% first-year allowance (i.e. full deduction in year of purchase).

• For other cars, you use the “main rate” (typically 18%) or “special rate” (6%) pools, depending on CO₂ emissions.

• You cannot use the Annual Investment Allowance (AIA) for cars.

Also, if the vehicle is partly for private use, only the business-use share is deductible.

C) Examples of Allowable Car-Related Costs

Here are the types of costs you can claim (or include within your mileage claim):

• Fuel, servicing, repairs, MOT

• Insurance

• Road tax / Vehicle excise duty

• Breakdown cover

• Parking, tolls, congestion charges

• Lease payments or hire costs (if vehicle is leased)

But note: You cannot claim:

• Costs of commuting (home to your “normal place of work”)

• Fines or penalties (parking fines, speeding tickets, etc.)

• Private use costs beyond the business proportion

  
  

Limited Company / Director / Employee Using A Car

When the business is a limited company, tax treatment is more complex because of the “benefit in kind” (BIK) regime and rules around reimbursement.

A) Owning or Leasing a Company Car

If the company owns (or leases) the car:

• The company can deduct running costs, insurance, servicing, etc., as business expenses.

• Lease payments are typically allowable, though there is a disallowance of 15% on lease payments for cars with CO₂ emissions over 50 g/km (i.e. 15% of the lease cost is not tax deductible).

• If there is personal use of the car (which is common), the employee or director must be taxed on the benefit-in-kind value. This is calculated based on list price, CO₂ emissions, and fuel type.

• If the company pays for fuel used in personal journeys, this generates an additional fuel BIK.

  
  

B) Reimbursement / Mileage from Company

If you use your own personal car for business journeys, the company can reimburse you at HMRC’s approved mileage rates (AMAPs). These reimbursements are tax- and National Insurance–free up to the approved rate.

The approved mileage rates are:

Vehicle	First 10,000 miles	Over 10,000 miles
Cars & vans	45p per mile	25p per mile
Motorcycles	24p	24p

If the employer reimburses more than this, the excess is treated as additional salary and taxed accordingly.

If the employer pays less or pays nothing, the employee may claim tax relief for the difference (subject to conditions).

C) Car Allowance vs Company Car

Some employers provide a car allowance (an extra sum of salary) instead of a company car:

• A car allowance is treated as additional taxable income (subject to Income Tax and NIC) rather than a business expense for the employee.

  
  
  
  

Key Tips, Record Keeping & Practical Examples

Record keeping is essential

To satisfy HMRC, you should keep:

• A mileage log with date, start point, end point, and purpose of each trip

• Receipts and invoices for fuel, servicing, insurance, repairs, etc.

• Evidence to split business vs private use

• Purchase/lease agreements and the purchase date/list price (for capital allowances)

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If audited, HMRC can challenge claims that do not have adequate supporting records.

Summary & What to Consider

• Yes, many car costs can be claimed, but only the business proportion, and following HMRC rules.

• Self-employed individuals choose between simplified mileage or actual cost methods.

• For limited companies, owning or leasing a car triggers BIK rules; reimbursements must follow HMRC-approved rates.

• The tax treatment depends heavily on CO₂ emissions, especially for capital allowances and lease disallowances.

• Always keep detailed, contemporaneous records; poor records are often the weakest point in claims.

• Before making big decisions (e.g. buying vs leasing, which car to pick), it's wise to consult an accountant, especially one familiar with motoring tax rules.

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