*Sponsored content from bp.
If you’ve just started out as a sole trader, you’re no doubt loving the sense of freedom that comes with doing your own thing. However, if this is the first time you’ve run your own business, you may have one or two questions about what expenses you can legitimately claim.
In this blog, we address some of the most frequently asked questions on the subject of car expenses.
Which method is best: mileage claim or actual cost?
So, that’s something of a ‘how long is a piece of string’ question. The answer depends on a number of variables. Mileage claim is definitely the easier way to go. All you need to do is keep track of your business mileage and then use the HMRC approved rate when you make your claim.
With actual cost, you’ll need to track all your vehicle expenses including fuel, maintenance, insurance and MOT (if relevant). You’ll then need to record what mileage is business related and which mileage is personal.
If you want to make sure you get this decision right, we’d recommend you calculate your expenses using both methods for your first year, and then you can opt for the one that works best for your business. It’s worth noting that, once you’ve made a choice, you’ll have to stick with your decision for as long as you own that same car.
Can you still claim if you owned the car before becoming self-employed?
Yes, you can always claim the HMRC approved mileage rate, no matter when you bought the car.
The complication comes if you’re using ‘actual cost’, as you’ll also have to calculate a value for capital allowances, something that can also be claimed using this method. Working out the correct value can be tricky if you owned the car before you became a sole trader, and we’d recommend you do a little more online research to fully understand this complex aspect of vehicle expenses.
How can fuel cards make life easier?
No more scrabbling around searching for stray invoices under the seats. With a good fuel card, tracking mileage and costs happens automatically which makes it effortless to claim back business expenses at the end of the month. The bp Fuel & Charge card, for example, makes it easy to manage all your expenses online. You can also process your HMRC-approved VAT invoices through the online platform.
Better still, every time you use the card, you earn points redeemable at M&S Simply Food and Wild Bean café so you can grab a free sandwich and coffee on the go.
The bp Fuel & Charge card is also a great way to save money for the business, as you pay less at the pumps with healthy discounts.
How can I prove the car was used for business purposes?
All it takes is just a little effort and you’re sorted on this one. Once you’re in the habit of regularly recording business mileage (and personal mileage if you’re using the actual cost method), this will become second nature. Then, keeping your records safe, in case they are ever needed as proof by HMRC, is all you need to do. The online platforms that come with many fuel cards will help you keep a much tighter grip on all this, without any of the paperwork you’re used to.
What if I lease a car?
No problem, you can still claim your mileage for business trips. You could also claim all your lease and insurance if the trip is for business reasons only. If you also use the lease car for personal journeys, then you can obviously only claim for the percentage of costs that were business related.
To find out more about the bp Fuel & Charge card and the many benefits it has for sole traders like yourself, simply click here.
*Disclaimer: This blog post is sponsored content, which is independent of the FMB. Publication does not constitute endorsement or recommendation from the FMB.
