Should I use mileage or a proportion of the cost of running a car?

For sole traders, you have a choice between using "simplified expenses" in the form of a mileage claim OR

Actual business use % of the cost of the car + appropriate running costs.

So which should you use?

Mileage

You can use HMRC’s approved mileage rates to work it out:

• 45p per mile for the first 10,000 miles

• 25p per mile after that

  
  

These claims are made per taxpayer, not per vehicle. So if you use more than one car for work, it’s your total mileage that counts.

Actual costs

Alternatively, you can claim capital allowances on the cost of your car +

business use proportions for the actual running costs

Costs such as:

• Fuel

• Insurance

• MOT

• Servicing

• Road Tax

Capital Allowances available on your car will depend on whether it's:

• new or used

• electric or not

• the emissions rate

Capital allowances are claimed each year on the reducing balance of your car. In other words, they will gradually write down the value of the car in your business.

Therefore, the corresponding value of the tax deduction in your business for that car, also reduces year on year.

As such, there is an element of "swings and roundabouts" in terms of the options and you'll need to think carefully about what's best for you. There is no single best option.

Final Thoughts for Freelance Musicians

When it comes to tax and travel expenses, it all boils down to consistency and location.

Keep in mind, once you elect for a particular method, you need to stick with it for the lifetime of that car within your business.

Keep good records of your mileage and locations, and always note the purpose of the trip. If in doubt, speak to a tax professional who understands the nuances of working in the music industry (hint: that’s me!).

Want more tailored advice? Join The Business of Music Community or check out the rest of our website for resources, courses, and support built specifically for musicians in the UK.