Sole trader car leasing tax question

My partner runs a sole trader company and he would like to lease a vehicle. This would be a second vehicle and only used occasionally for business use.

Can he offset the lease payments through his sole trader company? The emissions on this car would be below 112g/km CO2.

Jeff Peyton-Bruhl, national fleet manager for Hyundai, provides the answer.

The simple answer is yes he can. As the car is under 160g/km CO2, the total amount of the lease is allowable against the P&L account of the business, subject to the percentage of the business mileage to the overall mileage.

So, let’s take a car like our Hyundai i20 1.4 CRDi Comfort which has emissions of 110g/km. The cost per month to lease this vehicle (ex VAT) is £137. Let’s assume the business element is 20% of the overall mileage, which means you would be able to claim £27.40 against your tax.

If you are VAT-registered then you can also claim back 50% of the VAT on the rental too.

Editor’s note: The tax break for leasing has dropped from 160g/km to 130g/km since this piece was written. For further information, read: Budget 2012: company car leasing allowances