Most tax efficient way of buying car-self employed

loveka

I will probably need to buy a new- to me -car in the next year or so.

I am self-employed and work all over the country, so do a lot of miles which I am reimbursed for by my clients.

My question is can I claim the cost of a car against tax on my self assessment tax return? I will spend up to 5k on a car. A colleague told me that it is better tax wise to lease a new car, so I am confused!

I use my car 98% for work -it is only used personally to go to the supermarket, garden centre etc.

Thanks for any advice you can offer.

Pennywise

No. you can't claim the full cost of the car. You can only claim capital allowances which are either 8% or 18% on a reducing balance basis, so it would take many years to get tax relief for the purchase price.

Leasing is more tax efficient, but you'd pay a lot more in terms of the monthly payments. The tax relief is still only your normal tax/NIC rate, so even with better tax relief, it will probably still cost you a lot more. It would probably only turn out better if you were going to buy a new car (i.e. newly registered) and your choice was lease or buy. But in your case, your choice is between a relatively old second hand car bought outright or a new lease, so it's inevitably going to cost you more - tax relief is never going to bridge that gap!

For a relatively cheap car, you're probably best claiming the approved mileage rates per business mile. But, you'd have to do the number crunching - only you know your mileages and your motoring costs.