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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15917
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I work part self employed and earn a small amount from freelance

Resolved Question:

I work part self employed and earn a small amount from freelance work (less than ten thousand/per year). In the past I have claimed all my business travel on the standard 45 p per mile tariff. I am now though considering taking a monthly lease on a fully electric car. Are there any tax advantages in doing this (for example over non electric cars) - for example would the lease cost be claimable partly against tax?
Thanks
Duncan
UK
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

You can claim a deduction in your accounts for the lease costs less an adjustment for private use. Higher CO2 emissions cars (CO2s over 130g'km leased after 5 April 2014) will have the lease rental deduction restricted by 15%. See box 20 in the notes here. There are some notes with links on tax treatment of electric cars here.

You would need to compare the tax benefit of that against claiming the mileage allowance which is dependent on the business mileage you do.

I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.

Thanks for this. If I was to go with a lease option - so I simply estimate my business/personal mileage ratio? Also just to clarify If I lease the car and claim for this I can't also claim any business mileage? Finally, would there be greater benefits if I bought the car rather than leased it - as a Capital allowance?

Thanks again

Expert:  TonyTax replied 2 years ago.
You ought to keep a decent record of your mileage as HMRC may ask you to back up your claim. They don't generally like estimates.

You either claim the lease payments or the business mileage, not both. Once you have selected a method, you are stuck with it until you change the car.

As its is an electric car, you could write off the entire cost against your self-employed income for the year you buy it using the first year allowance rules. However, that may come back to bite you if you sell it as you only get in capital allowances what the net cost of the car to you is (cost less disposal) so there may be a clawback in a later year when you may be paying a higher rate of tax.
Customer: replied 2 years ago.

Thanks - just one last question - does the option of writing off the entire cost of purchasing a car apply to used as well as new electric cars?

Expert:  TonyTax replied 2 years ago.
It's only new electric cars I'm afraid. Take a look at paragraphs 9.1 and 9.2 here.
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