Top ten vehicle-related expenses sole traders can claim

Many sole traders couldn’t run their business without having a vehicle. Tradespeople couldn’t travel to customers’ homes or premises, many businesses couldn’t pick up supplies, make deliveries or take paying customers to their desired destination. Buying…

5 Minute Read

Last Updated: 5th June 2024

Many sole traders couldn’t run their business without having a vehicle. Tradespeople couldn’t travel to customers’ homes or premises, many businesses couldn’t pick up supplies, make deliveries or take paying customers to their desired destination.

Buying a vehicle and keeping it on the road is expensive, which creates a significant cost for sole traders. Thankfully, many vehicle-related costs can be claimed as allowable expenses, which reduces a sole trader’s taxable profits and annual tax bill. If you’re a sole trader, here are the top ten vehicle-related expenses that you can claim.

1. Buying vehicles

For cars, if you use traditional accounting (where you record your income and expenses by the date you invoiced or were billed), buying a car solely for your business can be claimed as a capital allowance. If you use cash-basis accounting (where you record income and expenses by the date payment was received or made), you can only claim a capital allowance if you’re not using simplified expenses (explained further on).

For all other business-related vehicles you buy, including vans, you claim an allowable expense. You can claim annual investment allowance (AIA) on motorbikes, lorries, vans and trucks and deduct the full value from your profits before tax. But if you sell the vehicle after claiming AIA, tax can be payable.

2. Vehicle leasing and hire

Leasing or hiring a vehicle for business can also be claimed as an allowable expense, but you can only claim the full costs if the vehicle’s carbon emissions are below a set threshold. Ask the leasing or hire company for a vehicle for which you can claim 100% allowable expenses. Once you return the lease/hire car/vehicle, additional mileage and wear-and-tear costs are wholly deductible as an allowable expense, providing the vehicle has only been used for business.

3. Fuel

You cannot claim fuel costs for journeys between your home and usual place of work. However, if you travel between your home and various sites (eg customers’ homes/premises, supplier’s premises, etc), fuel costs can be claimed as an allowable expense. You must maintain a detailed mileage record book, giving dates, destinations, miles travelled and reason, because HMRC can ask to see proof. For the same reason, keep safe all sales receipts for fuel purchases. Apps can make it much easier to record business mileage and use your phone to snap and store images of expense receipts.

Need to know! You can’t claim allowable expenses for fuel you’ve used for personal (ie non-business) journeys. Do so and you’re guilty of fraud, which can have very serious consequences.

4. Vehicle repairs

If you use a vehicle solely for business, any repair work that needs carrying out can be claimed as an allowable expense. This of course also extends to tyres and windscreens, whether they need repairing or replacing.   

5. Servicing and MOT

Regular servicing is key to ensuring that your business vehicle remains in good working order. It can help to keep you safe and prevent expensive vehicle repair bills. Most manufacturers recommend a full service once a year or every 12,000 miles. MOTs are required for vehicles that are three years old and over, with garages carrying out dozens of checks. Services and MOTs are both allowable expenses for sole trader vehicles.  

6. Vehicle insurance

Vehicle insurance is a legal requirement, of course, and if you use your vehicle a lot for business, you’ll need commercial vehicle or car insurance. Speak to a reputable broker for guidance. Specialist insurance is available, too (eg courier insurance). Get the insurance cover you need. It can be claimed as an allowable expense if wholly and exclusively for business. 

7. Vehicle license fees

You’ll need to pay a fee of £55 if you’re registering and taxing a business vehicle for the first time with DVLA, but this is an allowable expense. Road tax can also be claimed entirely as an allowable expense, if the vehicle is used only for business.

8. Vehicle breakdown cover

If you need to drive many miles on UK roads and motorways for business, having vehicle breakdown cover is advised. This too can be claimed in full as a sole trader allowable expense if the vehicle is used solely for business.

9. Parking fees

Some sole traders rack up significant parking fees because they work in city centres, where the parking tariffs can be high. Thankfully, parking fees can also be claimed as an allowable expense. A word of caution, though. If you receive a parking or speeding fine, you’ll need to pay for it out of your own pocket, because neither is an allowable expense.

10. Toll fees

If you have to use either of the Mersey Tunnels or the Mersey Gateway Bridge, the M6 toll road in the West Midlands, the Dartford Crossing, the Humber Bridge or Tyne Tunnel, toll fees can be claimed as an allowable expense. Ferry fees can also be claimed as an allowable expense.   

Did you know? If you’re not keen on having to work out actual vehicle purchase and running costs, claiming the simplified expenses flat rate offers a simpler solution. To cover all of your vehicle costs, you’re paid a flat rate for mileage (ie motorcycles 24p a mile; cars and good vehicles 45p a mile for the first 10,000 miles, then 25p for each additional mile).

What if I use the vehicle for work and personal reasons?

If you’re a sole trader or ordinary business partner and use a vehicle for both business and personal reasons, you’ll need to reliably work out the proportion of the costs for business use, and claim only for this. Where there is  mixed use, you cannot claim the full amount. As a sole trader you must keep detailed records of your allowable expenses, which you claim via your Self Assessment tax return.

GoSimpleTax is award-winning software that makes it quick and easy to complete and file your Self Assessment tax return and SA103. It can also prevent you from making basic tax return errors that can later cost you time and money. Thousands of sole traders, landlords and others trust and love GoSimpleTax. To find out why, start your FREE trial today!

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Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.

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