-
-
Car finance ›
-
‹ Back
-
TrustScore 4.4 | 13,110 reviews
-
-
‹ Back
-
Motorbike finance ›
-
‹ Back
-
TrustScore 4.4 | 13,110 reviews
-
-
‹ Back
-
Van finance ›
-
‹ Back
-
TrustScore 4.4 | 13,110 reviews
-
-
‹ Back
-
How it works ›
-
‹ Back
-
TrustScore 4.4 | 13,110 reviews
-
-
‹ Back
-
FAQs and guides ›
-
‹ Back
-
TrustScore 4.4 | 13,110 reviews
-
-
‹ Back
-
About us ›
-
‹ Back
-
TrustScore 4.4 | 13,110 reviews
-
-
‹ Back
-
TrustScore 4.4 | 13,110 reviews
-
Car finance ›
Can you claim car finance on your tax return?
Updated: Wednesday, 12 July 2023
Understanding what you may be able to claim on your self-assessment tax return could help you save money. If you are paying car finance, you might be asking, “can I claim car finance on my tax return?”.
In this guide, we’ll outline the key HMRC criteria so you can better understand whether you might be able to claim tax relief against self-employed car finance payments.
It’s important to know that we can’t offer financial advice, and we can’t say whether or not you can claim tax relief. If you are unsure, seek HMRC guidance or a qualified tax professional.
Are car finance payments tax deductible?
Whether you may be eligible to claim car finance payments on your tax return depends on several factors. The first is whether you are self-employed or run a business.
If you are self-employed or run your own business, you may be able to claim tax relief on vehicles used for business purposes. This is true whether you have bought a car outright or you are purchasing it through finance. In this case, you should be able to claim car finance on your tax return.
Cars purchased solely for personal use are not eligible for tax deductions because they aren’t related to running your business.
HMRC criteria for claiming business-related vehicle costs
Understanding the HMRC criteria for how cars are treated for tax purposes might save time, hassle, and money.
Certain expenses can be offset against a self-assessment. These will be expenses that are essential to how you earn an income. In some cases, your vehicle may be a necessary expense, as will fuel costs.
Below are some of the key criteria so you can better understand if you may be able to claim tax relief on your car finance payments. For full guidance, visit the HMRC website.
Capital allowances
Capital allowances are a type of tax relief. They allow you to deduct some or all of an item’s value from your profits before paying tax.
You may be able to claim the cost of your vehicle as a capital allowance, as long as it is used as a part of your business. The car must be suitable for private use and not built for the transportation of goods.
Types of allowance
The car emissions and year of purchase will also play a large part in what you can claim for tax purposes. These factors will determine whether first-year, main rate or special rate allowances apply.
You can check your car’s CO2 emissions using the UK Government’s tool.
The following rates for cars can be found on the UK Government’s page outlining capital allowances for business cars:
100% first-year allowances are eligible for:
- New, unused electric cars or those with 0g/km of CO2 emissions bought from April 2021
- New, unused electric cars or those with 50g/km or less of CO2 emissions bought from April 2018 to April 2021
- New, unused electric cars or those with 75g/km or less of CO2 emissions bought from April 2015 to April 2018
- New, unused electric cars or those with 95g/km or less of CO2 emissions bought from April 2013 to April 2015
- New, unused electric cars or those with 110g/km or less of CO2 emissions bought from April 2009 to April 2013
Main rate allowances are eligible for:
- Second-hand electric cars or new or second-hand cars with 50g/km emissions or less bought from April 2021
- Second-hand electric cars or new or second-hand cars with 110g/km emissions or less bought from April 2018 to April 2021
- Second-hand electric cars or new or second-hand cars with 130g/km emissions or less bought from April 2015 to April 2018
- Second-hand electric cars or new or second-hand cars with 130g/km emissions or less bought from April 2013 to April 2015
- Second-hand electric cars or new or second-hand cars with 160g/km emissions or less bought from April 2009 to April 2013
Special rate allowances are eligible for:
- New and second-hand cars with CO2 emissions that exceed 50g/km that were bought from April 2021
- New and second-hand cars with CO2 emissions that exceed 110g/km that were bought from April 2018 to April 2021
- New and second-hand cars with CO2 emissions that exceed 130g/km that were bought from April 2015 to April 2018
- New and second-hand cars with CO2 emissions that exceed 130g/km that were bought from April 2013 to April 2015
- New and second-hand cars with CO2 emissions that exceed 160g/km that were bought from April 2009 to April 2013
This information is accurate as of 29 April 2024.
Accounting type
The UK Government’s guidance for claiming travel expenses if you’re self-employed states that the type of accounting you use will also determine whether you can claim tax deductions on your car finance repayments.
Below we list the main types of accounting and how they may impact your ability to claim tax relief. If you’re unsure which type applies to you, contact a qualified tax professional.
These accounting types include:
Traditional accounting
Traditional accounting is used if you record the income and expenses in line with the date you billed the customer.
This can mean that you can invoice a customer near the end of a tax year and record that in that year’s taxable income. You might not receive the money until the next tax year.
With traditional accounting, you can claim capital allowance on your car’s purchase cost or finance repayments.
Cash basis accounting
Cash basis accounting records taxable income on the date the money is received rather than the date you billed the customer.
If you use cash-based accounting, you may be able to claim car finance as a capital allowance. A qualified accountant can advise you on this.
Simplified expenses
Simplified expenses mean that flat rates are applied to business car costs. You will record your business mileage, and flat rates will be included in your tax return.
The cost of a business car cannot be claimed as a capital allowance when using simplified expenses.
How to claim car finance on your tax return
The method for claiming car finance on your tax return depends on your personal circumstances. If you are unsure, see the HMRC guidelines or seek help from a qualified accountant.
If you are a sole trader, you should be able to claim capital allowances on your self-assessment tax return.
People in a business partnership may have to fill out a partnership tax return.
Limited companies typically complete a company tax return with separate capital allowance calculations.
We can’t give any financial advice and can’t tell you whether you are eligible or what tax relief you can claim. If you are unsure, you could speak to an accountant or tax specialist who may be able to help you complete the relevant tax documents.
What other car expenses are tax deductible in the UK?
There are several other vehicle expenses that you might be able to claim on your tax return:
- Business mileage: You can claim business mileage rates if you use your vehicle for business purposes. Any travel costs whilst on the job can be claimed as business mileage. The current UK business mileage rate for cars and vans in April 2024 is 45p per mile up to 10,000 miles. You can then claim 25p per mile for anything beyond this.
- Fuel costs, repairs, and maintenance: In their guidance for claiming expenses when you’re self-employed, the UK Government states you can only claim for fuel costs, repairs, and maintenance if you don’t claim business mileage. You must keep receipts and accurate records to do this.
- Insurance: Some forms of insurance cover business use. If your car is used solely for business, you may be able to claim relief on this through allowable business expenses.
- Road tax: All essential car driving costs are tax deductible if the car is only used for business. This includes road tax.
- Parking and tolls: You can claim additional expenses like parking and tolls when using the car for business purposes, but only if you keep the receipts.
FAQs about claiming car finance on your tax return
What evidence is required for claiming car finance on your tax return?
To claim car finance on your tax return, you will need to present HMRC with agreement documents detailing the date of the agreement and the amounts to be paid. This is the case for any tax-deductible business expense.
If you are unsure what evidence is required for your circumstances, HMRC recommend that you contact their self-assessment helpline.
Is taking out business car finance the same as personal finance when buying a vehicle?
Financing a car for business use might be similar, but you may need to provide additional documents.
Unfortunately, we don’t offer business car finance at Moneybarn. However, if you are self-employed then we might be able to help. For more information, see our guide which explains how to get car finance when you’re self-employed.
Understanding what you may be able to claim on your self-assessment tax return could help you save money. If you are paying car finance, you might be asking, “can I claim car finance on my tax return?”.
In this guide, we’ll outline the key HMRC criteria so you can better understand whether you might be able to claim tax relief against self-employed car finance payments.
It’s important to know that we can’t offer financial advice, and we can’t say whether or not you can claim tax relief. If you are unsure, seek HMRC guidance or a qualified tax professional.
Are car finance payments tax deductible?
Whether you may be eligible to claim car finance payments on your tax return depends on several factors. The first is whether you are self-employed or run a business.
If you are self-employed or run your own business, you may be able to claim tax relief on vehicles used for business purposes. This is true whether you have bought a car outright or you are purchasing it through finance. In this case, you should be able to claim car finance on your tax return.
Cars purchased solely for personal use are not eligible for tax deductions because they aren’t related to running your business.
HMRC criteria for claiming business-related vehicle costs
Understanding the HMRC criteria for how cars are treated for tax purposes might save time, hassle, and money.
Certain expenses can be offset against a self-assessment. These will be expenses that are essential to how you earn an income. In some cases, your vehicle may be a necessary expense, as will fuel costs.
Below are some of the key criteria so you can better understand if you may be able to claim tax relief on your car finance payments. For full guidance, visit the HMRC website.
Capital allowances
Capital allowances are a type of tax relief. They allow you to deduct some or all of an item’s value from your profits before paying tax.
You may be able to claim the cost of your vehicle as a capital allowance, as long as it is used as a part of your business. The car must be suitable for private use and not built for the transportation of goods.
Types of allowance
The car emissions and year of purchase will also play a large part in what you can claim for tax purposes. These factors will determine whether first-year, main rate or special rate allowances apply.
You can check your car’s CO2 emissions using the UK Government’s tool.
The following rates for cars can be found on the UK Government’s page outlining capital allowances for business cars:
100% first-year allowances are eligible for:
- New, unused electric cars or those with 0g/km of CO2 emissions bought from April 2021
- New, unused electric cars or those with 50g/km or less of CO2 emissions bought from April 2018 to April 2021
- New, unused electric cars or those with 75g/km or less of CO2 emissions bought from April 2015 to April 2018
- New, unused electric cars or those with 95g/km or less of CO2 emissions bought from April 2013 to April 2015
- New, unused electric cars or those with 110g/km or less of CO2 emissions bought from April 2009 to April 2013
Main rate allowances are eligible for:
- Second-hand electric cars or new or second-hand cars with 50g/km emissions or less bought from April 2021
- Second-hand electric cars or new or second-hand cars with 110g/km emissions or less bought from April 2018 to April 2021
- Second-hand electric cars or new or second-hand cars with 130g/km emissions or less bought from April 2015 to April 2018
- Second-hand electric cars or new or second-hand cars with 130g/km emissions or less bought from April 2013 to April 2015
- Second-hand electric cars or new or second-hand cars with 160g/km emissions or less bought from April 2009 to April 2013
Special rate allowances are eligible for:
- New and second-hand cars with CO2 emissions that exceed 50g/km that were bought from April 2021
- New and second-hand cars with CO2 emissions that exceed 110g/km that were bought from April 2018 to April 2021
- New and second-hand cars with CO2 emissions that exceed 130g/km that were bought from April 2015 to April 2018
- New and second-hand cars with CO2 emissions that exceed 130g/km that were bought from April 2013 to April 2015
- New and second-hand cars with CO2 emissions that exceed 160g/km that were bought from April 2009 to April 2013
This information is accurate as of 29 April 2024.
Accounting type
The UK Government’s guidance for claiming travel expenses if you’re self-employed states that the type of accounting you use will also determine whether you can claim tax deductions on your car finance repayments.
Below we list the main types of accounting and how they may impact your ability to claim tax relief. If you’re unsure which type applies to you, contact a qualified tax professional.
These accounting types include:
Traditional accounting
Traditional accounting is used if you record the income and expenses in line with the date you billed the customer.
This can mean that you can invoice a customer near the end of a tax year and record that in that year’s taxable income. You might not receive the money until the next tax year.
With traditional accounting, you can claim capital allowance on your car’s purchase cost or finance repayments.
Cash basis accounting
Cash basis accounting records taxable income on the date the money is received rather than the date you billed the customer.
If you use cash-based accounting, you may be able to claim car finance as a capital allowance. A qualified accountant can advise you on this.
Simplified expenses
Simplified expenses mean that flat rates are applied to business car costs. You will record your business mileage, and flat rates will be included in your tax return.
The cost of a business car cannot be claimed as a capital allowance when using simplified expenses.
How to claim car finance on your tax return
The method for claiming car finance on your tax return depends on your personal circumstances. If you are unsure, see the HMRC guidelines or seek help from a qualified accountant.
If you are a sole trader, you should be able to claim capital allowances on your self-assessment tax return.
People in a business partnership may have to fill out a partnership tax return.
Limited companies typically complete a company tax return with separate capital allowance calculations.
We can’t give any financial advice and can’t tell you whether you are eligible or what tax relief you can claim. If you are unsure, you could speak to an accountant or tax specialist who may be able to help you complete the relevant tax documents.
What other car expenses are tax deductible in the UK?
There are several other vehicle expenses that you might be able to claim on your tax return:
- Business mileage: You can claim business mileage rates if you use your vehicle for business purposes. Any travel costs whilst on the job can be claimed as business mileage. The current UK business mileage rate for cars and vans in April 2024 is 45p per mile up to 10,000 miles. You can then claim 25p per mile for anything beyond this.
- Fuel costs, repairs, and maintenance: In their guidance for claiming expenses when you’re self-employed, the UK Government states you can only claim for fuel costs, repairs, and maintenance if you don’t claim business mileage. You must keep receipts and accurate records to do this.
- Insurance: Some forms of insurance cover business use. If your car is used solely for business, you may be able to claim relief on this through allowable business expenses.
- Road tax: All essential car driving costs are tax deductible if the car is only used for business. This includes road tax.
- Parking and tolls: You can claim additional expenses like parking and tolls when using the car for business purposes, but only if you keep the receipts.
FAQs about claiming car finance on your tax return
What evidence is required for claiming car finance on your tax return?
To claim car finance on your tax return, you will need to present HMRC with agreement documents detailing the date of the agreement and the amounts to be paid. This is the case for any tax-deductible business expense.
If you are unsure what evidence is required for your circumstances, HMRC recommend that you contact their self-assessment helpline.
Is taking out business car finance the same as personal finance when buying a vehicle?
Financing a car for business use might be similar, but you may need to provide additional documents.
Unfortunately, we don’t offer business car finance at Moneybarn. However, if you are self-employed then we might be able to help. For more information, see our guide which explains how to get car finance when you’re self-employed.
For a better road ahead
Moneybarn is a member of the Finance and Leasing Association, the official trade organisation of the motor finance industry. The FLA promotes best practice in the motor finance industry for lending and leasing to consumers and businesses.
Moneybarn is the trading style of Moneybarn No. 1 Limited, a company registered in England and Wales with company number 04496573, and Moneybarn Limited, a company registered in England and Wales with company number 02766324. The registered address for these companies is: Athena House, Bedford Road, Petersfield, Hampshire, GU32 3LJ.
Moneybarn’s VAT registration number is 180 5559 52.
Moneybarn Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702781)
Moneybarn No. 1 Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702780)
