If you purchase a car on finance, you may be able to claim certain costs as an allowable expense, but not the full repayment:
1. Car Finance Costs
- Interest on finance - Only the interest portion of repayments is claimable as a business expense.
- Capital repayment – The car's purchase cost is not an expense but may be claimed via capital allowances.
2. Capital Allowances
If the business owns the car (outright or on hire purchase):
- Electric/zero emission cars – 100% First-Year Allowance (FYA) (full deduction in year one).
- CO₂ up to 50g/km – 18% Writing Down Allowance (WDA) per year.
- CO₂ over 50g/km – 6% WDA per year.
3. Business vs Personal Use
- Claims must be adjusted for personal use.
- Self-employed? Choose between capital allowances or simplified mileage rate (45p/mile for 10,000 miles, then 25p/mile) - not both.