Vehicle Expenses
Vehicle expenses can reduce taxable profit, but the rules depend on who owns the vehicle and whether the journey is for business.
Business mileage includes journeys to visit customers, temporary workplaces or work-related training. Ordinary commuting between home and a permanent workplace and personal journeys cannot normally be claimed.
Using Your Own Vehicle for a Limited Company
A director or employee using their own car or van for business can be reimbursed using HMRC’s approved mileage rates. From 6 April 2026, the rate is 55p per mile for the first 10,000 business miles and 25p thereafter.
The mileage rate covers fuel, insurance, servicing, repairs, vehicle tax and depreciation. You cannot claim these costs separately when using the mileage method. Business parking, tolls and congestion charges may be reimbursed separately.
If the company pays less than the approved amount, the individual may claim tax relief on the difference. Payments above the approved amount may need to be reported and taxed.
Sole Traders and Partnerships
Eligible sole traders and partnerships can calculate vehicle expenses using simplified mileage or the business proportion of actual costs.
Actual costs may include fuel, insurance, servicing, repairs, MOT costs and vehicle tax. Capital allowances may also be available on the purchase price. Personal use must be excluded.
Once simplified mileage has been used for a vehicle, it must normally continue for as long as that vehicle is used in the business. Limited companies cannot use simplified expenses, although they can reimburse directors and employees under the mileage allowance rules.
Company-Owned Vehicles
Where a limited company owns or leases a vehicle, it may claim qualifying running costs. Tax relief on the purchase price is normally given through capital allowances.
If a company car is available for private use, including commuting, a taxable benefit may arise for the employee or director. Providing private fuel can create an additional fuel benefit, so the overall tax cost should be reviewed before buying a car through the company.
Keep a Mileage Log
Record the date, destination, purpose and number of miles for every business journey. If claiming actual costs, retain invoices and receipts and record total and business mileage. Accurate bookkeeping is essential.
Vehicle Expense Advice in Cambridge and Nottingham
GMS Accountants helps sole traders and limited companies in Cambridge and Nottingham choose the correct method, maintain reliable records and understand the tax implications of business vehicles.
