self employed (schedule D) and car payments
Discussion
A barrister friend of mine claims that he gest about 75% of his £1000 per month car payment deducted on his tax. Frankly, I didn't believe him - but he reckons his accountants at PWC sort it out
My question - sorry EricMc - is how much of my proposed £500 per month car payment could I offset on my next tax return? As a second car I could use it solely for business, though this would be less than 10,000 miles per year.
My question - sorry EricMc - is how much of my proposed £500 per month car payment could I offset on my next tax return? As a second car I could use it solely for business, though this would be less than 10,000 miles per year.
IIRC, if your business vehicle is used solely for business purposes and is NOT AVAILABLE for personal use (inc commuting) then 100% of the cost can be claimed. Again, IIRC, this is best only to do with a van, and one that is left at the business premises overnight (i.e. not a residential address)
Eric
I am self employed and I just bought my last car and thats it. I keep most of my petrol receipts. If I am directing Hollyoaks, I rack up 150 miles /day.
If I am consulting in Leeds I rack up less miles. Either way, I do about 10,000 a year.
I would only consider spending more on a car if I though I could offset some of it (ie depreciation, running, interest on finance etc) against my Sched D tax bill.
John
I am self employed and I just bought my last car and thats it. I keep most of my petrol receipts. If I am directing Hollyoaks, I rack up 150 miles /day.
If I am consulting in Leeds I rack up less miles. Either way, I do about 10,000 a year.
I would only consider spending more on a car if I though I could offset some of it (ie depreciation, running, interest on finance etc) against my Sched D tax bill.
John
You have two options available for claiming your vehicle running costs.
First - "The Old Fashioned Way"
Record ALL your vehicle running costs (fuel, maintenance costs, insurance, road tax etc).
Total them for the year. Claim these costs against your business income but only after you have restricted them by the Private Useage proportion. The PU element is calulated by comparing business miles in the year to total miles.
Make your Capital Allowance claim on the capital cost of the vehicle taking into account the "Expensive Motor Cars Restriction". Apply the PU element to the resulting Capital allowance value calculated.
If you have borrowed to buy the car, you can also claim the interest charges as a business expense, again restricting them by the PU percentage.
Second - "The Alternative Method"
Igonore all the above and simply calculate your business motoring costs by multiplying the total number of business miles in the year by 40p per mile. If you exceed 10,000 business miles in the year, the extra miles can only be claimed at 25p per mile.
>> Edited by Eric Mc on Wednesday 21st December 16:20
First - "The Old Fashioned Way"
Record ALL your vehicle running costs (fuel, maintenance costs, insurance, road tax etc).
Total them for the year. Claim these costs against your business income but only after you have restricted them by the Private Useage proportion. The PU element is calulated by comparing business miles in the year to total miles.
Make your Capital Allowance claim on the capital cost of the vehicle taking into account the "Expensive Motor Cars Restriction". Apply the PU element to the resulting Capital allowance value calculated.
If you have borrowed to buy the car, you can also claim the interest charges as a business expense, again restricting them by the PU percentage.
Second - "The Alternative Method"
Igonore all the above and simply calculate your business motoring costs by multiplying the total number of business miles in the year by 40p per mile. If you exceed 10,000 business miles in the year, the extra miles can only be claimed at 25p per mile.
>> Edited by Eric Mc on Wednesday 21st December 16:20
So, with the second method I could offset up about £4000 of business motoring if I did 10,00 miles? This figure to include petrol, maintenance, interest, depreciation etc?
Is there a simple spreadsheet, say on the IR web pages, where I can calculate allowances using that first, complicated method?
Is there a simple spreadsheet, say on the IR web pages, where I can calculate allowances using that first, complicated method?
Yes to your first assertion and probably not to your second one. To be honest, the "Old Fashioned Way" is still the main way it is done and is usually handled pretty competently by most accountants.
Don't forget, you should be using a Capital Allowance computation to claim tax relief on your main business assets (office equipment, plant and machinery, computers, printers etc) so the capital allowance computation on your car is usually just an additional element to the overall Capital Allowances schedule.
Don't forget, you should be using a Capital Allowance computation to claim tax relief on your main business assets (office equipment, plant and machinery, computers, printers etc) so the capital allowance computation on your car is usually just an additional element to the overall Capital Allowances schedule.
Thanks Eric
I've been pretty lax in claiming this sort of thing over the years, mainly as I don't spend a great deal on computers, printers etc and I had a 4 year stint as a company director on PAYE, rather than Sched D.
Years back, when I was freelance Associate Producer, my canny Scottish accountant claimed a hefty percentage of my household running costs, as I had an office at home. I wonder if I should go back to doing this for this year, as I work from home quite a bit. Maybe Gordon owes me a little allowance!
John
I've been pretty lax in claiming this sort of thing over the years, mainly as I don't spend a great deal on computers, printers etc and I had a 4 year stint as a company director on PAYE, rather than Sched D.
Years back, when I was freelance Associate Producer, my canny Scottish accountant claimed a hefty percentage of my household running costs, as I had an office at home. I wonder if I should go back to doing this for this year, as I work from home quite a bit. Maybe Gordon owes me a little allowance!
John
Yes you can. Add up your council tax, water charges and gas and electricty bills. Divide them by the total number of habitable rooms in the house not including hallways, utility rooms, garage etc). If you have (say) six habitable rooms, divide the total by 6 and that gives you a legitimate "Use of Home as Office Cost". There are no Capital Gains Tax or planning issues arising either (despite what you might hear).
On Capital Allowances, I am amazed that people don't claim what they are entitled to. At the moment, you can claim 50% allowance on plant and machinery in the year it is purchased. If you spent £1,000 on computer equipment, you can offset £500 against your overall income for tax purposes. If you pay tax at 40%, that's a £200 reduction in your tax bill (plus a small reduction in your Class 4 NI liability too). For each successive year you can claim 25% on the reducing value.
Why give money to Gordon he isn't entitled to?
On Capital Allowances, I am amazed that people don't claim what they are entitled to. At the moment, you can claim 50% allowance on plant and machinery in the year it is purchased. If you spent £1,000 on computer equipment, you can offset £500 against your overall income for tax purposes. If you pay tax at 40%, that's a £200 reduction in your tax bill (plus a small reduction in your Class 4 NI liability too). For each successive year you can claim 25% on the reducing value.
Why give money to Gordon he isn't entitled to?
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