Tax on car used by self employed person

[dicky113]

I am self-employed. I bought a car which I use for a part-time job for which I am paid a mileage allowance. I am also self-employed in my own business ( My main job) for which I have occasional work use of the car.

A) How is the mileage allowance treated?

B) If say the car cost �10000 can I write any of this amount off against tax? I believe I can depreciate it over time and offset a % but am not sure how this is worked out.

Help would really be appreciated. Thankyou.

[kags]

If the allowance paid to you by your employer is within the rates specified by HMRC as being tax free, then you will not be taxed, nor pay National Insurance on it (see rates here).

http://tinyurl.com/cpom8

As regards the use of the car in your business, you can claim a capital allowance for it. In the first year you can claim 25% of the cost, but the allowance will be restricted to the proportion of business miles you do, for example if you do 20,000 miles a year, but only 10,000 are for your self-employed business, you can claim �10,000 x 25% x 50%. You will then deduct �2,500 (ie the allowance BEFORE the business use restriction) from the cost of �10,000, and carry forward �7,500 to the next tax year. In the next year, you do the same calculation, gradually reducing the balance available. When you sell the car, the proceeds are compared to the balance, and a tax allowance or charge made accordingly. There are special rules if the car costs more than �12,000, or if the car is new and has low CO2 emissions (not more than 120gms per km).

[dicky113]

Thanks very much Kags.