Tax question capital allowance when replacing van

[Alrey87]

Hi, bought my van 2 years ago for 15600 which was claimed in full as a capital allowance
Let’s say the value now is 10000 and I buy a new van for 20000.
Does the 10k sale of my old van get added onto my taxable profit for the year? If so that 10k is all taxable at 40% whereas it was claimed as a 20% relief
Is the 20k cost of the new van then claimed back as a capital allowance in essence giving me relief at 40% back on the 10k from my old van?

[Eric Mc]

Have you sold or traded in your old van?

If so, how much did you get for it?

The proceeds on disposal (whether sold or traded in) are ADDED to your taxable net business profits.

If the van has just been removed from the business i.e. taken by you privately, then market value is substituted for any sale price or trade in values.

Is your business VAT registered?

Is your business a limited company?

[Alrey87]

It would be sold. I’m a sole trader not limited or vat. The sale of the van would take me to about 62-65k net profit.

Put another way how can I calculate the net cost of buying a 20k van while selling a 10k van in my position.

[Eric Mc]

You can claim £20,000 Annual Investment Allowance on the new van. That reduces your taxable trading profit by £20,000.

You declare £10,000 income on the disposal of the old van. That increases your taxable trading profit by £10,000.

So overall, with the £20,000 claim and the £10,000 declaration, you will be reducing your taxable trading profit by £10,000. This will save you £2,000 tax at 20% or £4,000 tax at 40% - plus you will also get a Class 4 NI reduction.