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I’m self-employed: what’s the most tax-efficient way to run my business car?

A self-employed optician wants to know the most tax-efficient way to run a car
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Self-employed optician: wants a clear perspective on the most tax-efficient position on a car

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23 June 2011

Optician needs advice on self-employed tax position and business cars

The self-employed -can claim all of their business motoring as a taxable expense, minus any private usage
Self-employed optician: wants a clear perspective on the most tax-efficient position on a car

I’M a self employed optician and I work between two practices so I clock up around 900 miles a month for work and probably 25-50 miles for personal use if that.

Most of my driving is town driving (not in central London) and about 100 is motorway. My current car was purchased outright eight years ago and needs replacing.

I’m looking at the new Golf MK6 and I’m thinking of either the diesel (CO2 emission 123g/km) or the BlueMotion (CO2 emission 109g/km).

I don’t mind a brand new car or a car that’s one-two years’ old – my decision will be influenced by the most tax efficient option! Budget is around £20k.

I’m unsure how the tax rules apply to me so I don’t know what I can claim and what I can’t? Any help in this matter would be greatly appreciated. I’m not VAT registered and currently do my own tax returns.

Paul Bulloch, managing director of Concept Vehicle Leasing, is our expert on self-employed and business car tax.

As self-employed, you can claim 100% of all your motoring expenses with a restriction of 20% for the private mileage element – HMRC won’t accept much less than that unless you can prove categorically your business versus private mileage with detailed daily logs.

As for the capital allowances on your purchase, it would be more tax efficient to choose the VW Golf Bluemotion, because cars with CO2 emissions below 110g/km qualify for 100% capital allowances in the first year – again with the 20% restriction for the private mileage element.

If you were to choose the VW Golf GT then the capital allowances would be 20% per annum (minus 20% private mileage restriction) on a reducing balance basis.

In terms of finance, you could choose HP or lease purchase and claim the interest element as a taxable expense (again with the private restriction), because as an optician you won’t be VAT-registered. However, should you prefer to lease your car, say through a personal contract hire lease, then the entire rentals would be allowable as a taxable expense (minus private element) – although you would not then be able to claim capital allowances.

We would advise you to take professional car advice either through a car dealer or through a BVRLA-approved car leasing broker, as well as taxation advice from an accountant.

 

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Ralph Morton

Ralph Morton

Ralph Morton is an award-winning journalist and the founder of Business Car Manager (now renamed Business Motoring). Ralph writes extensively about the car and van leasing industry as well as wider fleet and company car issues. A former editor of What Car?, Ralph is a vastly experienced writer and editor and has been writing about the automotive sector for over 35 years.

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