Self employed / electric car Tax benefits ??
Discussion
HELP !
I'm getting a tad confused about the tax benefits of buying a BMW i3. I'm self employed sole trader not limited company and 50% of car use is work related. Could someone please give me an idea of the tax benefits over 3 years of buying this car. Purchase price is £30k and I'm financing it on a PCP deal.
Thanks.
Phil.
I'm getting a tad confused about the tax benefits of buying a BMW i3. I'm self employed sole trader not limited company and 50% of car use is work related. Could someone please give me an idea of the tax benefits over 3 years of buying this car. Purchase price is £30k and I'm financing it on a PCP deal.
Thanks.
Phil.
It's a bit sneaky asking for fairly detailed calculations on a public forum. I am quite happy to give general pointers but asking for this type of detail is something you should really be putting to your accountant.
As you are not a limited company, then there will be no BIK charges - and you will get some tax relief on the capital costs and the running costs - suitably restricted for "private use".
However, why not look at some "Commercial Vehicles" which give much better allowances overall.
As you are not a limited company, then there will be no BIK charges - and you will get some tax relief on the capital costs and the running costs - suitably restricted for "private use".
However, why not look at some "Commercial Vehicles" which give much better allowances overall.
I believe that if the car has below 100g/co2, you can write off up to 100% of the capital cost in one year, so in your case, 50% as this is yr bussiness proportion. The car has to be brand new to do this.
I've done this when the rules where bellow 110g/co2. There is a special allowance for this in your tax return, I'm a sole trader too. You don't need to worry about company car tax etc, that's for company's.
The next tax bracket is 100- 130g/co2, here 18% can be written off on a decreasing scale each year. Thus roughly matches depreciation in the early years, the car doesn't have to be new to do this.
However, with all capital expense, there is the remaining balance when the car is sold or traded in, on which you'll be taxed in that years accounts, eg. If the car was worth 10k in 4 years, that would have to be added into those years profits, though obviously you have had tax benefit on these in the 1st year.
How you finance it is irrelevant, unless it's a lease as your not buying it. PCP really defers a lump of money until a chosen point where you can pay it or trade in. Interest on the finance can be written off also.
I'm not an account btw, but it's quite simple for sole traders - I think the gov website has details on this.
Capital wxpenses aren't the same as investments in plant/equipment/machinery. This is why commercial vehicles can be better as the previous poster says.
Hope this helps
I've done this when the rules where bellow 110g/co2. There is a special allowance for this in your tax return, I'm a sole trader too. You don't need to worry about company car tax etc, that's for company's.
The next tax bracket is 100- 130g/co2, here 18% can be written off on a decreasing scale each year. Thus roughly matches depreciation in the early years, the car doesn't have to be new to do this.
However, with all capital expense, there is the remaining balance when the car is sold or traded in, on which you'll be taxed in that years accounts, eg. If the car was worth 10k in 4 years, that would have to be added into those years profits, though obviously you have had tax benefit on these in the 1st year.
How you finance it is irrelevant, unless it's a lease as your not buying it. PCP really defers a lump of money until a chosen point where you can pay it or trade in. Interest on the finance can be written off also.
I'm not an account btw, but it's quite simple for sole traders - I think the gov website has details on this.
Capital wxpenses aren't the same as investments in plant/equipment/machinery. This is why commercial vehicles can be better as the previous poster says.
Hope this helps
pauldavies85 said:
How you finance it is irrelevant, unless it's a lease as your not buying it.
Therefore, how you finance the acquisition IS relevant.The capital allowance and accounting treatment of assets varies depending on whether -
a) you are buying outright
b) whether you are financing using a bank loan or HP
c) whether you are acquiring the vehicle on a finance lease
d) whether you are operating the vehicle using an operational lease
Cases a) and b) are essentially treated the same. Cases c) and d) are different.
pauldavies85 said:
I believe that if the car has below 100g/co2, you can write off up to 100% of the capital cost in one year, so in your case, 50% as this is yr bussiness proportion. The car has to be brand new to do this.
I've done this when the rules where bellow 110g/co2. There is a special allowance for this in your tax return, I'm a sole trader too. You don't need to worry about company car tax etc, that's for company's.
The next tax bracket is 100- 130g/co2, here 18% can be written off on a decreasing scale each year. Thus roughly matches depreciation in the early years, the car doesn't have to be new to do this.
However, with all capital expense, there is the remaining balance when the car is sold or traded in, on which you'll be taxed in that years accounts, eg. If the car was worth 10k in 4 years, that would have to be added into those years profits, though obviously you have had tax benefit on these in the 1st year.
How you finance it is irrelevant, unless it's a lease as your not buying it. PCP really defers a lump of money until a chosen point where you can pay it or trade in. Interest on the finance can be written off also.
I'm not an account btw, but it's quite simple for sole traders - I think the gov website has details on this.
Capital wxpenses aren't the same as investments in plant/equipment/machinery. This is why commercial vehicles can be better as the previous poster says.
Hope this helps
Thanks Paul that's helped me get my head around it a bit more. I'm a sound engineer not an accountant.......I've done this when the rules where bellow 110g/co2. There is a special allowance for this in your tax return, I'm a sole trader too. You don't need to worry about company car tax etc, that's for company's.
The next tax bracket is 100- 130g/co2, here 18% can be written off on a decreasing scale each year. Thus roughly matches depreciation in the early years, the car doesn't have to be new to do this.
However, with all capital expense, there is the remaining balance when the car is sold or traded in, on which you'll be taxed in that years accounts, eg. If the car was worth 10k in 4 years, that would have to be added into those years profits, though obviously you have had tax benefit on these in the 1st year.
How you finance it is irrelevant, unless it's a lease as your not buying it. PCP really defers a lump of money until a chosen point where you can pay it or trade in. Interest on the finance can be written off also.
I'm not an account btw, but it's quite simple for sole traders - I think the gov website has details on this.
Capital wxpenses aren't the same as investments in plant/equipment/machinery. This is why commercial vehicles can be better as the previous poster says.
Hope this helps
Sorry, I meant financing is not relevant if your buying the vehicle. Obviously a rental based agreement is simply that, you can not right off capital expense that isn't yours. You can right off lease payments though.
Eric mc, I've heard about commercial vehicles being viewed different, I assume pooled as plant?
Does that I mean I can my usual car with bussiness proportion and also a van/pick up?
As a bussiness I have little use for a van, would this reduce my business proportion on the car?
Eric mc, I've heard about commercial vehicles being viewed different, I assume pooled as plant?
Does that I mean I can my usual car with bussiness proportion and also a van/pick up?
As a bussiness I have little use for a van, would this reduce my business proportion on the car?
Sorry, I meant financing is not relevant if your buying the vehicle. Obviously a rental based agreement is simply that, you can not right off capital expense that isn't yours. You can right off lease payments though.
Eric mc, I've heard about commercial vehicles being viewed different, I assume pooled as plant?
Does that I mean I can my usual car with bussiness proportion and also a van/pick up?
As a bussiness I have little use for a van, would this reduce my business proportion on the car?
Eric mc, I've heard about commercial vehicles being viewed different, I assume pooled as plant?
Does that I mean I can my usual car with bussiness proportion and also a van/pick up?
As a bussiness I have little use for a van, would this reduce my business proportion on the car?
pauldavies85 said:
Sorry, I meant financing is not relevant if your buying the vehicle. Obviously a rental based agreement is simply that, you can not right off capital expense that isn't yours. You can right off lease payments though.
Eric mc, I've heard about commercial vehicles being viewed different, I assume pooled as plant?
Does that I mean I can my usual car with bussiness proportion and also a van/pick up?
As a bussiness I have little use for a van, would this reduce my business proportion on the car?
The rules on leased assets are complex. There are different rules whether the lease is an "Operating Lease" (i.e. simple rental) or a Finance Lease (similar to, but NOT an HP).Eric mc, I've heard about commercial vehicles being viewed different, I assume pooled as plant?
Does that I mean I can my usual car with bussiness proportion and also a van/pick up?
As a bussiness I have little use for a van, would this reduce my business proportion on the car?
Regarding Commercial Vehicles - yes, if you were claiming the annual Writing Down Allowance, then they would be placed in what HMRC refer to as the "Plant and Machinery" pool. However, they are (like most Plant and Machinery) eligible for the 100% First Year Allowance (FYA) which means that, if claimed, would not be put in the Pool.
The 100% FYA should only be claimed if there is no Private Usage. To facilitate this, it would be worthwhile ensuring that there is an ordinary (non-business) available for private journeys.
Thanks for that info, it's interesting. I also believe motorcycles are not treated in the same light as motor vehicles, cars.
It's got me thinking!
So as long as I've got some private use on my current car 50:50, and poss use of other private vehicle, I could include a commercial/motorbike. Would I need yo reduce my bussiness proportion of the car, or is it irrelevant as the 'plant' may not be he's billy used?
Make sense?
It's got me thinking!
So as long as I've got some private use on my current car 50:50, and poss use of other private vehicle, I could include a commercial/motorbike. Would I need yo reduce my bussiness proportion of the car, or is it irrelevant as the 'plant' may not be he's billy used?
Make sense?
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