Motor Expenses

SELF EMPLOYED LOCUM

As a self employed locum GP there are two methods available to claim motor expenses.

  • Method 1 – the first method is to claim a mileage rate of 45p a mile for your business miles, reducing to 25p per mile after 10,000 miles.
  • Method 2 – the second method is to keep records of all your motor expenses for any vehicles that you use for your business and claim the business percentage of these costs.  If you use this method you can also claim for something called Capital Allowances, which is effectively an allowance for the wear and tear on the vehicle.

Method 2.  So for example, if you used your car 50% for business and 50% for private use you could claim a tax deduction on the costs as detailed below:

Example

Petrol                                    £2,600

Insurance                              £1,000

Repairs                                     £500

Road tax                                   £120

Annual service                        £800

RAC/AA                                     £75

Total                                      £5,095

 

Less 50%

Private use                           £2,547

Allowable expense              £2,548

 

Please note that the mileage from your home to the surgery will be considered by the Revenue as private mileage and not business mileage.

CAPITAL ALLOWANCES

You can also claim capital allowances on the cost of the car.  The rate of capital allowances you can claim is dependent upon the CO2 emission level of your vehicle.   The amount you can claim can range from 100% to 8%.  A 100% capital allowance claim accelerates the available tax relief.

To qualify for 100% first year capital allowances, there is an upper CO2 emissions limit of 95 g/km which extends up to 5 April 2016. The car must be bought new.  There is a wide range of vehicles including many luxury vehicles. For a sole trader with a top rate of tax at 40% who would use the car with 50% private use the following tax savings would be made:

Based on a Volkswagen Golf 5 Door 1.6 TDI blue-motion  110 PS rated at 85 g/km.

Purchased in the 2014/15 Tax Year

Approximate price £20,000

Capital allowances claim £20,000

but restricted to 50% business use therefore tax relief £10,000 at 40% tax plus 2% NIC.

Tax saving in year of purchase £4,200.

This means the after tax cost of the vehicle is an effective £15,800.

The following web-link  shows  the current 285 vehicles that qualify.

http://comcar.co.uk/advanced/selector/profiles/FirstYearAllowance?clk=1

The cars that qualify for 100% capital allowances has increased over the last couple of years, previously only micro-cars qualified.

If you are buying a car which you are using mainly for business and doing a large amount of business miles, then method 2 usually gives a higher tax relief.

SALARIED LOCUM

You will almost always make a claim using Method 1, the mileage claim.

LOCUM TRADING THROUGH A PERSONAL SERVICES COMPANY

You will almost always claim using Method 1, the mileage claim.

LOCUM TRADING THROUGH AN UMBRELLA COMPANY

The umbrella company will dictate what expenses you can claim.  You will nearly always use Method 1, the mileage claim.

HOW WE CAN HELP

In both Method 1 and Method 2 you need to know the level of your business mileage.  We ask clients to keep mileage records to enable us to do calculations for both methods.  We determine which method is best for you and therefore help keep your tax to a minimum.