We have a business spending category just for vehicles, which you might choose to set for the purchase of your business car. It’s important to check HMRC guidance when reclaiming VAT or claiming a tax expense for vehicles, because the treatment can vary depending on the type of vehicle, the reason you bought it (i.e. just for business, or for personal use too) as well as CO2 emissions.

At the moment, the Toolkit does not support capital allowances - transactions are treated as tax deductible expenses. So depending on your situation, you might need to change the allowable tax amount and VAT set for your car purchase transaction, which will affect the accuracy of your sole trader tax estimation:

• If you’re not VAT registered: you could set the allowable tax amount to £0 for your car purchase, so that it is not included in your sole trader tax estimation. But don’t forget to include the claimable capital allowance for the purchase in your tax return.

• If you are VAT registered: you’ll need to change the allowable tax amount to reflect the portion of the car purchase that is just for business use, so that any claimable or irrecoverable VAT is included in your VAT calculation and VAT return. Just something to be mindful of: applying an allowable tax amount on your car purchase transaction results in it being included as an expense in your sole trader tax estimation, so your tax liability may be understated. So when filling out your tax return, don't forget to remove your car purchase from the Toolkit’s sole trader tax estimation and include the claimable capital allowance in the appropriate section of your tax return.