Tax and NI

9. Cars and Tax

9.1 If you are a self-employed person using your own car for work, you must keep a record of business miles travelled.

• Whenever your car is serviced, make sure the mileage reading is noted on the bill. This will enable you to work out the car's total mileage for the year - and provide evidence to satisfy the tax inspector.
• You must estimate what percentage of the mileage was for business purposes. For example, if the business mileage is 75 per cent of the total, you can claim 75 per cent of your car costs (petrol, insurance, repairs) as business expenses. You can also claim 75 per cent of the capital allowance if the car is only used for business (see 8.2).
• Alternatively, you may be able to claim an allowance in line with HM Revenue & Customs Approved Mileage Allowance Payments (see 9.2).

9.2 Employees who use their own cars usually receive a mileage allowance.

• If mileage allowances are paid in line with HM Revenue & Customs Approved Mileage Allowance Payments (AMAP), there is no extra liability. If they are greater than AMAP, the difference is taxable.
• AMAP for cars and vans are 40p a mile for the first 10,000 miles, and 25p a mile thereafter.

9.3 An employee using a company car for private use pays income tax on this 'benefit'.

The employer also has to pay National Insurance on it, as if the benefit were paid out as salary.

• Calculation of the benefit is based on the list price of the car and its carbon dioxide emissions.
• Since 6 April 2010, the list price percentage for electric cars and vans has been 0 per cent, meaning that no income tax will need to be paid on the benefit.
• If fuel is provided for private use, this is subject to tax and employer's National Insurance as a benefit, based on a fuel charge.