Claiming Tax Relief on Your Car as a Creative Business Owner

If you run a creative business, whether that’s a design studio, film production outfit or content creation empire, you probably find yourself clocking up some business miles. Maybe you drive to client shoots, meetings or networking events. But what about the cost of all that travel? Can you claim any of it back through your business?

Good news: yes, you can. But the how depends entirely on your business setup. The rules are very different depending on whether you're a sole trader or a limited company.

Let’s break down your options in plain English.

If You’re a Sole Trader: You’ve Got Two Main Options

When you’re a sole trader, the vehicle is usually considered your personal asset but that doesn’t mean you can’t claim some of the costs. You’ve got two different ways to go about it:

Option 1: Claim a Flat Rate for Each Business Mile (Simplified Expenses)

This is the simplest method and great if you don’t want the faff of keeping every fuel receipt or splitting costs.

You claim:

• 45p per mile for the first 10,000 business miles in a tax year
• 25p per mile after that

This rate is designed to cover all your running costs including fuel, servicing, insurance, road tax and even wear and tear - so you can’t claim anything else on top.

Pros:

• Super simple
• No need to keep detailed fuel receipts or track every cost

Cons:

• If you have high actual running costs, this might not reflect your true expenses

Worth noting: If you choose this method you must stick with it for as long as you use that particular vehicle in your business. You can only then switch to option 2 if you acquire a different vehicle. 

Option 2: Claim a Share of Your Actual Costs

If your car is a bit more expensive to run (hello, creative road-trippers or those with kit-laden vehicles) this method might work better. You can claim a portion of your actual costs - fuel, servicing, insurance, MOT, road tax, etc. based on how much you use the car for business versus personal life.

For example, if 40% of your total mileage is for business use, you can claim 40% of your total car running costs.

Pros:

• Potentially more accurate and generous if you’ve got high running costs

Cons:

• You need to keep good records (receipts, mileage logs, etc.)
• You’ll need to work out the business-use percentage

Bonus: You Can Also Claim for Buying the Vehicle Itself

If you go with this method, you’re also allowed to claim tax relief on the cost of the vehicle by spreading it over a few years using something called capital allowances. In plain English, that means you can get tax relief on the purchase price of the car, again, only for the business-use portion.

For example, if you buy a car for £10,000 and use it 40% for business, you can claim tax relief on £4,000 over time.

Important: If you use the flat-rate (simplified expenses) method, you can’t also claim capital allowances or actual running costs. It’s one or the other.

If You’re a Limited Company: It’s a Bit More Complicated

If your business is set up as a limited company, you have a few choices, but they’re not the same as for sole traders.

Option 1: Claim Mileage Allowance for Use of a Personal Car

This is often the most tax-efficient and admin-light approach.

If you (as the director or employee) use your own personal vehicle for business journeys, the company can reimburse you at:

• 45p per mile for the first 10,000 miles
• 25p per mile after that

This is tax-free to you and a tax-deductible cost for the company.

Pros:

• Simple and clean
• No company car tax issues

Cons:

• Same flat-rate downside - might not cover high actual running costs
  
  

Option 2: The Company Buys or Leases the Car

This is a different kettle of fish.

If the company owns or leases the car, all costs (fuel, insurance, repairs, tax, etc.) are paid by the company. But, there’s a catch.

If the car is also available for any personal use (including commuting), you’ll likely have to pay Benefit in Kind (BIK) tax, which is an additional personal tax based on the car's emissions, value, and whether the company also pays for fuel. This can completely negate the tax advantage for higher-emission vehicles. 

Pros:

• Company gets tax relief on all running costs and lease payments

Cons:

• You’ll pay personal tax on the ‘perk’ of using the car
• More admin (P11D forms, payroll reporting, etc.)
• Generally only worthwhile for electric or ultra-low-emission vehicles

Pro tip: For many creative businesses with occasional travel, this method often isn’t worth the faff - mileage reimbursement tends to be the simpler and cheaper route. However, if you are going to buy a brand new car anyway then you may be offered preferential financing options as a business, so don't rule it out completely. 

Don’t Forget: Keep Records!

Whichever method you use, the golden rule is: record everything.

That means:

• Mileage logs showing dates, destinations, and reasons for business trips
• Receipts for fuel, servicing, insurance, etc. (if claiming actual costs)
• Lease or purchase agreements (if the company owns the car)

Good records keep you on the right side of HMRC and make sure you don’t miss out on valid claims.

What About Creative Industry Specifics?

You might not be zipping between building sites or sales meetings, but your travel could still qualify as business use - think:

• Trips to client offices
• Driving to shoots or recording locations
• Visits to galleries, studios, or suppliers
• Travel to industry events or trade shows

All these can count as legitimate business mileage, as long as you’re not just commuting from home to your usual office space.

Final Thoughts

Whether you're a one-person creative studio or a growing agency, don’t leave travel costs unclaimed. Even a few hundred pounds of relief each year adds up over time, and that’s money you can reinvest in your next project, camera or creative course.

Still unsure which method suits your setup best? That’s where a friendly accountant comes in handy (hint: that’s us). We can walk you through the options and make sure you’re not missing a trick.

Need help?

Why not book a meeting with us to discuss your circumstances and see how we can help.