Car or van for self-employment?
Discussion
I'm now fully self-employed, having given up my part time PAYE job in October.
I work from home, but have to visit customer's homes and trade premises, collecting/delivering jobs maybe 3 days a week. I will probably do 4 or 5000 miles a year. I currently have an old Panda diesel, which is cheap to run, with class 1 business insurance. I haven't claimed any of the running costs against the business so far.
The Panda is OK for local journeys, but is quite tiring if I'm driving it for more than half an hour at a time. It's noisy and cramped, and the ride is a bit bouncy.
I have a 2015 Touareg as my private use car, so the Panda is only used for business and popping to the local shops. About 90% of the mileage will be for business.
It's quite liberating having an old shed for business use, as I don't have to worry about scratching it down single track lanes, or getting clipped while parked. I do keep thinking it would be nice to have something that drives better and can carry more stuff though.
How do I work out the "sweet spot" of what to replace the Panda with for business use?
A van may be more beneficial for tax, but will the higher insurance and limited choice outweigh that? A van might be useful for advertising if it's signwritten.
A 5 door car is actually easier than a van for me to carry stuff, as the back seats are ideal places to carry old clocks, with my tools etc, in the boot. A van would need some fitting out or storage boxes to be useful. Are there any small vehicles that are classed as vans for income tax purposes, but have 5 doors and back seats and are subject to car speed limits?
I'm looking at something the next size up from a Panda, so a Bipper/Nemo/Qubo type vehicle, maybe Doblo/Kangoo. No budget as such, as long as it makes financial sense, and is old enough that I don't have to worry about it too much.
I work from home, but have to visit customer's homes and trade premises, collecting/delivering jobs maybe 3 days a week. I will probably do 4 or 5000 miles a year. I currently have an old Panda diesel, which is cheap to run, with class 1 business insurance. I haven't claimed any of the running costs against the business so far.
The Panda is OK for local journeys, but is quite tiring if I'm driving it for more than half an hour at a time. It's noisy and cramped, and the ride is a bit bouncy.
I have a 2015 Touareg as my private use car, so the Panda is only used for business and popping to the local shops. About 90% of the mileage will be for business.
It's quite liberating having an old shed for business use, as I don't have to worry about scratching it down single track lanes, or getting clipped while parked. I do keep thinking it would be nice to have something that drives better and can carry more stuff though.
How do I work out the "sweet spot" of what to replace the Panda with for business use?
A van may be more beneficial for tax, but will the higher insurance and limited choice outweigh that? A van might be useful for advertising if it's signwritten.
A 5 door car is actually easier than a van for me to carry stuff, as the back seats are ideal places to carry old clocks, with my tools etc, in the boot. A van would need some fitting out or storage boxes to be useful. Are there any small vehicles that are classed as vans for income tax purposes, but have 5 doors and back seats and are subject to car speed limits?
I'm looking at something the next size up from a Panda, so a Bipper/Nemo/Qubo type vehicle, maybe Doblo/Kangoo. No budget as such, as long as it makes financial sense, and is old enough that I don't have to worry about it too much.
Don't need to visit a tip, so that's not a problem.
I does seem a bit daft that the most tax-efficient vehicle can be a relatively large and heavy dual cab pickup.
Do any of these van-based cars qualify as vans for income tax?
I guess there's a good reason why a battered old Corsa Combo sells for several times the price of Corsa car
I does seem a bit daft that the most tax-efficient vehicle can be a relatively large and heavy dual cab pickup.
Do any of these van-based cars qualify as vans for income tax?
I guess there's a good reason why a battered old Corsa Combo sells for several times the price of Corsa car
clockworks said:
Don't need to visit a tip, so that's not a problem.
I does seem a bit daft that the most tax-efficient vehicle can be a relatively large and heavy dual cab pickup.
Do any of these van-based cars qualify as vans for income tax?
I guess there's a good reason why a battered old Corsa Combo sells for several times the price of Corsa car
It's either a commercial vehicle or it's not, for tax purposes. You don't get cheap road tax either. Yes there are a lot of combo's for sale at highish prices, I swapped into a newer one recently, and they are expensive for what is basically an old diesel car. Prices have firmed recently, I guess there are increasingly more self employed people wanting a 'cheap van', so it's supply and demand. I does seem a bit daft that the most tax-efficient vehicle can be a relatively large and heavy dual cab pickup.
Do any of these van-based cars qualify as vans for income tax?
I guess there's a good reason why a battered old Corsa Combo sells for several times the price of Corsa car
Have you tried buying a car personally, invoice the business £0.45 per mile for the business use.
Say you do 700 business miles per month that works out at £315 per month tax free. So if you were to have monthly payment for car, monthly insurance bill etc then the £325 should cover a good majority of that cost.
Say you do 700 business miles per month that works out at £315 per month tax free. So if you were to have monthly payment for car, monthly insurance bill etc then the £325 should cover a good majority of that cost.
Genuinely self-employed, sole trader. I repair clocks, using the 2 dormer bedrooms as workshop and office/storage.
I expect profit to be around £15k next tax year - it's not a well paid trade. Fortunately I have a couple of DB pensions that pay the household bills.
While I was just doing this part time I didn't bother with claiming tax relief on my vehicle and use of my home. I just declared a simple profit figure on my self assessment each year. I'm now doing it full time, and business is growing. It's time to do it properly.
I have made contact with an accountant, and I'll be having a session with him in a few weeks, when I take his clock back. I just want to get my head around the basics before the meeting.
I expect profit to be around £15k next tax year - it's not a well paid trade. Fortunately I have a couple of DB pensions that pay the household bills.
While I was just doing this part time I didn't bother with claiming tax relief on my vehicle and use of my home. I just declared a simple profit figure on my self assessment each year. I'm now doing it full time, and business is growing. It's time to do it properly.
I have made contact with an accountant, and I'll be having a session with him in a few weeks, when I take his clock back. I just want to get my head around the basics before the meeting.
I think a properly logo'd van would be ideal for your business.
The tax reliefs on "Commercial Vehicles" are very generous including the ability to write off the entire purchase price of the vehicle in the year the vehicle was purchased. This claim is made under the "Annual Investment Allowance" (AIA) which is part of the Capital Allowance rules.
The AIA can only be claimed if the vehicle is purchased outright or though a genuine loan (including HPs).
If acquired under a "Finance Lease" or a "Rental" arrangement, you cannot claim AIA (or any Capital Allowances for that matter) but you can obtain tax relief on the payments to the leasing company and (possibly) the normal accounting depreciation.
AIA can not be claimed on motor cars and the general capital allowances on motor cars are very restricted.
The tax reliefs on "Commercial Vehicles" are very generous including the ability to write off the entire purchase price of the vehicle in the year the vehicle was purchased. This claim is made under the "Annual Investment Allowance" (AIA) which is part of the Capital Allowance rules.
The AIA can only be claimed if the vehicle is purchased outright or though a genuine loan (including HPs).
If acquired under a "Finance Lease" or a "Rental" arrangement, you cannot claim AIA (or any Capital Allowances for that matter) but you can obtain tax relief on the payments to the leasing company and (possibly) the normal accounting depreciation.
AIA can not be claimed on motor cars and the general capital allowances on motor cars are very restricted.
OK, I've found a lot of useful info on the HMRC website.
It looks like no van-derived cars qualify as vans for VAT relief, so I guess that means they don't qualify for AIA, and I would have to use the writing down allowance.
There are some car-derived vans that qualify, but no small ones with rear seats, so nothing that suits my needs.
So, a car or van-derived car and the writing down allowance seems like they way I will have to go.
I then seem to have 2 options:
Use the 45p per business mile method.
or
Claim for all the business-related vehicle expenses (insurance, servicing, fuel, RFL) and writing down allowance.
Reading up on capital allowances for vehicles, it looks like there are 3 rates, depending on emissions. If I keep below 130gm CO2, it's 18% of the purchase price. 130 or above, it drops to 8%. Is this correct?
The way I understand it, with my current Panda (which has so far cost me £1200 including purchase, full service and a new clutch) it makes sense to claim the 45p. If I replace the Panda with a similar car for £3k, the 45p a mile still makes sense. If I buy a new or nearly new car, the writing down and expenses method becomes more beneficial, but I'll be spending more money to pay for it out of my own pocket.
It's all rather complicated
EDIT
Quick calculation, assuming annual mileage of 4000 in a small car (less than 130gm CO2) that does 50mpg, it looks like claiming flat 45p per mile is better for a vehicle that costs less than about £4500.
Sticking with my current Panda (that does nearly 70mpg and stands me in at £1200) and claiming 45p a mile tax relief seems like the best option - unless I've got something wrong?
Guess I'd better start keeping a mileage log.
It looks like no van-derived cars qualify as vans for VAT relief, so I guess that means they don't qualify for AIA, and I would have to use the writing down allowance.
There are some car-derived vans that qualify, but no small ones with rear seats, so nothing that suits my needs.
So, a car or van-derived car and the writing down allowance seems like they way I will have to go.
I then seem to have 2 options:
Use the 45p per business mile method.
or
Claim for all the business-related vehicle expenses (insurance, servicing, fuel, RFL) and writing down allowance.
Reading up on capital allowances for vehicles, it looks like there are 3 rates, depending on emissions. If I keep below 130gm CO2, it's 18% of the purchase price. 130 or above, it drops to 8%. Is this correct?
The way I understand it, with my current Panda (which has so far cost me £1200 including purchase, full service and a new clutch) it makes sense to claim the 45p. If I replace the Panda with a similar car for £3k, the 45p a mile still makes sense. If I buy a new or nearly new car, the writing down and expenses method becomes more beneficial, but I'll be spending more money to pay for it out of my own pocket.
It's all rather complicated
EDIT
Quick calculation, assuming annual mileage of 4000 in a small car (less than 130gm CO2) that does 50mpg, it looks like claiming flat 45p per mile is better for a vehicle that costs less than about £4500.
Sticking with my current Panda (that does nearly 70mpg and stands me in at £1200) and claiming 45p a mile tax relief seems like the best option - unless I've got something wrong?
Guess I'd better start keeping a mileage log.
Edited by clockworks on Saturday 26th January 13:52
clockworks said:
OK, I've found a lot of useful info on the HMRC website.
It looks like no van-derived cars qualify as vans for VAT relief, so I guess that means they don't qualify for AIA, and I would have to use the writing down allowance.
There are some car-derived vans that qualify, but no small ones with rear seats, so nothing that suits my needs.
So, a car or van-derived car and the writing down allowance seems like they way I will have to go.
I then seem to have 2 options:
Use the 45p per business mile method.
or
Claim for all the business-related vehicle expenses (insurance, servicing, fuel, RFL) and writing down allowance.
Reading up on capital allowances for vehicles, it looks like there are 3 rates, depending on emissions. If I keep below 130gm CO2, it's 18% of the purchase price. 130 or above, it drops to 8%. Is this correct?
The way I understand it, with my current Panda (which has so far cost me £1200 including purchase, full service and a new clutch) it makes sense to claim the 45p. If I replace the Panda with a similar car for £3k, the 45p a mile still makes sense. If I buy a new or nearly new car, the writing down and expenses method becomes more beneficial, but I'll be spending more money to pay for it out of my own pocket.
It's all rather complicated
EDIT
Quick calculation, assuming annual mileage of 4000 in a small car (less than 130gm CO2) that does 50mpg, it looks like claiming flat 45p per mile is better for a vehicle that costs less than about £4500.
Sticking with my current Panda (that does nearly 70mpg and stands me in at £1200) and claiming 45p a mile tax relief seems like the best option - unless I've got something wrong?
Guess I'd better start keeping a mileage log.
Do not assume that VAT rules directly translate to Income Tax rules. They don't. The definition of "commercial vehicles" is a classic case where the definitions can differ.It looks like no van-derived cars qualify as vans for VAT relief, so I guess that means they don't qualify for AIA, and I would have to use the writing down allowance.
There are some car-derived vans that qualify, but no small ones with rear seats, so nothing that suits my needs.
So, a car or van-derived car and the writing down allowance seems like they way I will have to go.
I then seem to have 2 options:
Use the 45p per business mile method.
or
Claim for all the business-related vehicle expenses (insurance, servicing, fuel, RFL) and writing down allowance.
Reading up on capital allowances for vehicles, it looks like there are 3 rates, depending on emissions. If I keep below 130gm CO2, it's 18% of the purchase price. 130 or above, it drops to 8%. Is this correct?
The way I understand it, with my current Panda (which has so far cost me £1200 including purchase, full service and a new clutch) it makes sense to claim the 45p. If I replace the Panda with a similar car for £3k, the 45p a mile still makes sense. If I buy a new or nearly new car, the writing down and expenses method becomes more beneficial, but I'll be spending more money to pay for it out of my own pocket.
It's all rather complicated
EDIT
Quick calculation, assuming annual mileage of 4000 in a small car (less than 130gm CO2) that does 50mpg, it looks like claiming flat 45p per mile is better for a vehicle that costs less than about £4500.
Sticking with my current Panda (that does nearly 70mpg and stands me in at £1200) and claiming 45p a mile tax relief seems like the best option - unless I've got something wrong?
Guess I'd better start keeping a mileage log.
Edited by clockworks on Saturday 26th January 13:52
As you are not VAT registered (I assume), I would highly advise against looking at any VAT definitions as you may be misled.
One point I would also make is that, if claiming the actual costs of motoring and the relevant capital allowances on the vehicle (rather than using the 45p per mile scheme), it is also likely that you would need to reduce the claim to take into account "private usage" - unless the vehicle is used 100% for business only.
Edited by Eric Mc on Saturday 26th January 14:07
Actually, thinking about it, claiming 18% write down each year would probably make more sense for me in the long term. Might even make more sense if I only kept the vehicle for a year or two, depending on the depreciation.
EDIT
I'm not VAT registered - way below the threshold, and it wouldn't make sense to register voluntarily.
I appreciate that I could only claim for the business use percentage.
EDIT
I'm not VAT registered - way below the threshold, and it wouldn't make sense to register voluntarily.
I appreciate that I could only claim for the business use percentage.
Edited by clockworks on Saturday 26th January 14:15
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