New van capital allowances (monthly payments) HP tax treatm

[ddsea]

Help!
I bought a van from a dealer at a purchase cost of £19,194, on a HP agreement, paid £3,200 cash and the balance of £15,994 over 3 years + interest.

Cash 3,200

Interest 2,827
Capital 15,994

Total 22,021

I have only earned income of £18k less general exp £4k, profit of £14k) this year, less my personal allowance 8k, leaving 5k to pay tax on. Do I offset only £5k of the AIA against this £5k, then take 18% WDA per year thereafter, is it up to the whole value of £22k, or the purchase price £19k?

Advice would be much appreciated.

[Eric Mc]

You obviously don't need to claim the entire AIA. However, you might want to as that would create a trading loss which means you can carry the loss forward for offset against future profits.

Do you have any other taxed income such as income from employment?

[ddsea]

No other income. I have offset the 5k & claimed AIA for my last set of acs, now in a position this year don't know whether I claim 18% of the remaining balance including interest etc, or against the net amount. Also the interest do I claim against expenses?
Many Thanks!

[Eric Mc]

You claim 18% of the Written Down Value of the asset brought forward from last year - and so on each year until you dispose of the asset.

You can claim the interest element of the HP repayments each year until the HP ceases.

[Alpinestars]

If you are projecting to make 5k ish taxable profit a year, claim the whole lot, carry forward the amount not used in year 1. You'll get relief quicker that way than only claiming 5k in year 1.

[Eric Mc]

That's kind of what I said at the start. The proviso is that you should always make sure you use your normal Personal Tax Allowance (currently £10,000) first before making any Capital Allowance claims. You don't want to waste any Capital Allowances.

[Alpinestars]

Agreed. It all depends on projections.