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Limited companies can benefit from a company car, van or motorcycle. Whether you’re transporting equipment and materials or simply travelling between clients, having a mode of company transport can be invaluable. If you’re a sole trader, you can’t have a company car, but other options are available.
Purchasing a vehicle for business purposes can be something of a grey area for the self-employed. Can you claim it as a business expense? What about fuel? And repairs? Are there any special taxes you need to think about?
If you’re a self-employed sole trader, then you won’t be able to have a company car, as there is no company. However, you still have a choice of how to claim your business mileage expenses. We explain business mileage and business vehicles for sole traders in our detailed article on sole trader expenses.
If you run your business as a limited company and you’re thinking of getting a company car, you should always contact your accountant to discuss what the best option is for your business. If you’re looking to get the lay of the land, however, we’ve compiled everything you need to get you started.
What are the tax obligations?
Your company car will be taxed as a benefit in kind, with some fairly complex company car rules, because it is an asset used by you or your employees for benefit, and doesn’t feature in any salary payments. You can read more about other benefits in kind in our article, “What are benefits in kind?”.
Whether to purchase a car through your company or to buy the car personally is a complex decision you should always take advice on. For instance, electric car tax liabilities are often less due to their low carbon emissions. This may be attractive to your business and to you personally.
On the other hand, if you will be travelling a high number of business miles, it may be more tax efficient to purchase the car yourself and then claim business mileage expenses through your limited company.
If you’d like to really get under the bonnet of company car taxation, to calculate what you’re likely to pay in tax, you can check out our in-depth article on taxation of company cars.
Company cars and vans
The current business mileage rate for cars and vans is set by HMRC at 45p for the first 10,000 miles, and 25p thereafter. If you are paid at a rate higher than that set by HMRC, you’ll need to report the difference on your annual P11D return as a Benefit in Kind.
Company bikes and motorcycles
Bikes and motorcycles are also subject to business mileage rates - for motorcycles, the rate is fixed at 24p for all miles travelled. For normal push-bikes, the rate is also fixed for all miles travelled at 20p (this is only for limited companies, sole traders cannot claim mileage for cycling).
What else can I claim as a travel expense?
There are other travel expenses you can claim on your company vehicle, including:
- Vehicle insurance
- Parking
- Breakdown cover
- Repairs and servicing.
Just remember to check in with your accountant before you go ahead and make any of these claims - they’ll be able to give you more tailored advice about what you can claim.
What other expenses can I claim?
Our jargon-free Take the Leap videos will give you instructions on exactly what you’re entitled to claim as business expenses - and how to go about
doing it. You might be surprised to learn about the various business expenses that
you never thought you could claim before.
How to claim company vehicles in the Crunch app
Our knowledge article “Should I have a company car, van or motorcycle?” can help you decide if this is the best option for your company. Or you can speak to your client manager. If you already have a company vehicle, then here’s how to record it in Crunch.
If the vehicle is a van or a bicycle, bring the vehicle into company ownership as an asset. Record the van in Crunch under the expense type Fixed Assets > Motor Vehicles Cost, and if the vehicle is a bicycle record it as Fixed Assets > Equipment Cost.
Record the cost of fuel for the company van as Motor Expenses > Company Van Running Costs. Remember: don’t record the cost of fuel for a van under the mileage expense type, unless the van is owned by you personally.
Record the cost of any repairs, maintenance or insurance for a company van as Motor Expenses > Company Van Running Costs. Again, only do this if the van is owned by the company.
Record the cost of any repairs, maintenance or insurance for a bicycle as Motor Expenses > Company Bicycle Running Costs.
