Own Business - Own car & claim mileage or company car?

[DrEagle]

Own Business - Own car & charge claim mileage or company car?

My wife is a self employed interpreter. She needs a car for travelling between various secondments.

Currently she uses her private car and claims 40p a mile from the business.
I understand that she can only claim the first 10,000 miles at 40p a mile tax free then it reduces to 25p tax free.

If say she does 15000 miles she would claim £5250 of which say half would be petrol costs. Giving her £2625 for running costs.
As she is doing more than 10,000 business miles a year this has an impact on the cost of running the car (tyres, maintenance, servicing etc.) plus the big one: depreciation.

Would it be tax advantageous for her sole trader operating company to own the car take the hit on all of the costs and depreciation, which would make the business less profitable and therefore have to pay less tax.
Is leasing a better option?

I guess she would then have to pay company car tax and pay back her private mileage?

Is there any advice you can give on this dilemma?

Many thanks in anticipation.

Why is it all so complicated? :-)

[awj1]

I am a little confused – is your wife self employed and fill out a self assessment tax return for her income, or is she a director of her own limited company through which she works?

Amanda Wade-Jones
A Wade Tax Consultancy
amanda@tax-consultancy.co.uk

[DrEagle]

Hi Sorry Amanda, She is self employed. Self Assessment.

[awj1]

Purely on the running costs of her car, she has two options:
1. To carry on doing the 40p per business mile or,
2. To take a relevant proportion (dependant on the business mileage to the total mileage in the year) of all the running costs of the car, insurance, servicing, road tax, repairs, fuel etc together with the same proportion of capital allowances (the tax equivalent of depreciation).

The same calculation for the allowable proportion of the lease car costs would be the same as option 2 above.

I would be reluctant to switch methods mid way through her accounting period though.

I am also assuming that she is not VAT registered.

I hope this helps

Amanda Wade-Jones
A Wade Tax Consultancy
amanda@tax-consultancy.co.uk