Car leasing tax advantages for freelancers

My car is developing some problems and I am seriously thinking about replacing it. I am a freelance language trainer and approximately 10% of my driving is for work purposes.

One option is to lease a car. Does anyone know much of the leasing cost could I offset against tax and whether this is significantly different to the costs I can offset when I own the vehicle.

Leasing simply allows you to pay the costs of depreciation in value on the basis of a financial loan over a fixed period of time. You don't need to amortise the outright purchase of the vehicle as a capital purchase over 5-years so it's a tax efficient way to own a vehicle within a business. The main financial benefit of leasing, is recovery of VAT on the lease payments, so you save around 19% of the cost at the outset, but only, of course if you are registered for VAT. Otherwise the tax treatment is the same as whole-ownership. You can choose either to accept a monthly tax liability of 1% of the gross value of the car when new (even if you buy it used) and write off all costs of ownership (lease, insurance, fuel, repairs, etc), or keep a detailed log of all journeys split between business and pleasure and split the costs accordingly. If you only use 10% for business then the 1% rule may be better for you, but it depends on the type (value) of car you have and the costs it may incur.

Thanks, that's helpful.