Is Car Insurance a Tax-Deductible Business Expense?

Yes, car insurance can be a business expense if the vehicle is used for work-related purposes. However, the tax treatment depends on:

• Whether you are a sole trader, limited company, or employee.

• The percentage of business vs. personal use of the car.

• Whether the car is owned personally or by the business.

If your vehicle is used exclusively for business, the full cost of car insurance can be claimed as a deductible expense. If it is used for both personal and business purposes, only the business-related portion of the insurance can be claimed.

Car Insurance and Business Use: Who Can Claim?

1. Sole Traders and Self-Employed Individuals

Sole traders can claim a percentage of car insurance as a business expense, based on how much they use the vehicle for work.

If you use your car 50% for business and 50% for personal use, you can claim 50% of the insurance cost.

If the car is used only for business, you can claim 100% of the insurance cost.

Example:

• If your annual car insurance premium is £800 and you use your car 60% for business, you can claim £480 (£800 × 60%) as a deductible business expense.

2. Limited Companies

If a company owns the vehicle, car insurance can be claimed as a fully deductible business expense. However, if an employee or director uses the vehicle for personal travel, this is considered a taxable benefit and must be reported to HMRC.

Company car users may also be subject to Benefit-in-Kind (BIK) tax, depending on CO2 emissions and list price of the car.

3. Employees Using a Personal Car for Work

If you’re an employee using your personal car for work-related travel (excluding commuting), you cannot claim car insurance as an expense, but you can claim mileage allowance from your employer or HMRC.

The current mileage rates set by HMRC are:

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

• 25p per mile thereafter.

These rates cover fuel, maintenance, insurance, and depreciation costs.

How to Claim Car Insurance as a Business Expense

1. Calculate Business Use Percentage

Determine what percentage of your vehicle’s use is for business purposes. Keep a mileage log to track business vs. personal trips.

2. Keep Accurate Records

HMRC requires clear records of all business expenses, including:

• Car insurance policy documents.

• Mileage logs (for mixed-use vehicles).

• Receipts for insurance payments.

3. Report the Expense in Tax Returns

Sole traders claim car expenses in the self-assessment tax return (SA103).

Limited companies claim insurance costs in company accounts as an allowable expense.

For company cars, ensure that Benefit-in-Kind (BIK) tax is calculated correctly if employees use the vehicle for personal trips.

What Other Car-Related Expenses Can You Claim?

If your vehicle is used for business, you may also claim:

• Fuel and mileage costs (if not using mileage allowance).

• Repairs and servicing.

• Road tax (Vehicle Excise Duty – VED).

• MOT tests and maintenance.

• Breakdown cover.

• Lease or hire costs (if the car is leased by the business).

Keeping detailed financial records will ensure you claim the maximum allowable expenses while staying compliant with HMRC rules.

When Can’t You Claim Car Insurance as a Business Expense?

You cannot claim car insurance as a business expense if:

• The vehicle is used solely for personal use.

• The expense is for an employee’s personal car used for commuting (only mileage allowance applies).

• The car is used by a company employee without being declared as a taxable benefit.

HMRC conducts audits on business expenses, so it’s essential to ensure claims are legitimate and properly documented.

How RoadXpert Can Help

At RoadXpert, we assist businesses with:

• Business car insurance solutions tailored to company needs.

• Guidance on tax-deductible vehicle expenses.

• Car leasing and financing options for businesses.

If you’re a business owner, sole trader, or company director looking for the best insurance and finance solutions, our team is here to help. Visit www.roadxpert.com for expert advice on business car insurance and tax savings.