Sole trader capital allowances on two vehicles
Discussion
I became a sole trader last year and have spent the year working as a consultant. I also purchased two used vehicles an EV to use primarily for work and another car for just personal use.
I'm claiming capital allowance and expenses on the EV at a ratio of 60% business and 40% personal. I was expecting the consulting to slowly fizzle out so got a private hire license so I could uber as a side gig with a view to growing that once the consulting has finished. As of 01/01/25 my EV is now a fully licensed private hire vehicle with plates/stickers to boot.
As a result of this I'm now using my other car for the consultancy work. I've also had the contract extended by another 12 months with the probability of a rolling contact after that.
Now that the EV is fully dedicated to private hire I intend to claim this at a ratio of 95% business 5% personal. Is it OK to adjust this ration 3/4 of the way through the tax year? So from Apr-Dec @ 60% and then Jan-Mar @ 95%.
l'd then also like to claim capital allowance and expenses on the other car at 60% business 40% personal. Is this doable?
I'm claiming capital allowance and expenses on the EV at a ratio of 60% business and 40% personal. I was expecting the consulting to slowly fizzle out so got a private hire license so I could uber as a side gig with a view to growing that once the consulting has finished. As of 01/01/25 my EV is now a fully licensed private hire vehicle with plates/stickers to boot.
As a result of this I'm now using my other car for the consultancy work. I've also had the contract extended by another 12 months with the probability of a rolling contact after that.
Now that the EV is fully dedicated to private hire I intend to claim this at a ratio of 95% business 5% personal. Is it OK to adjust this ration 3/4 of the way through the tax year? So from Apr-Dec @ 60% and then Jan-Mar @ 95%.
l'd then also like to claim capital allowance and expenses on the other car at 60% business 40% personal. Is this doable?
Taxable Benefits in Kind are related to employees and/or directors of limited companies and are part of the PAYE regulations. The proprietor of a sole trader business is not an employee or director of their own business so are not taxed personally under PAYE - therefore BIK rules do not apply to them.
Simpo Two said:
My understanding is that you can only put one car 'through the books' at a time. If one becomes fully depreciated then you can start on another.
There is no restriction on the number of vehicles you can have in your own business. However, unless you have a specifically designated business vehicle which is used 100% for business purposes only, then ANY vehicle being used (by default) MUST have a "dual use" aspect to it i.e. it is used sometimes for business and sometimes for private purposes.If that is the case, any business related claims for these vehicles - whether you are talking about vehicle running costs or capital allowances claims, must have the claims restricted to the business use only element of those claims.
HMRC does not lay out specifically how you arrive at a split between business v' private use but the one they recommend, and the most logical, is to do it on a mileage basis. In other words, if the total mileage in the year for the vehicle was 5,000 miles and 2,000 of that was business related, then only 2/5 of the running costs and capital allowances claims can be made for that vehicle. If you have a second or third vehicle you should apply the appropriate split for that vehicle.
Motor cars and commercial vehicles are treated differently for tax purposes, especially in regards to capital allowance claims. On the whole, the capital allowance regime for cars is is much less generous than for commercial vehicles - but the business/private rules apply to both classes if appropriate. On the whole, most individuals who have a commercial vehicle in their business would rarely use it for private purposes so, in practice, private use adjustments are rare for trucks, vans, JCBs etc.
At the moment, capital allowances on EVs are generous - although that won't last unless the government changes ts mind.
And, of course, there are certain types of vehicles which can be interpreted as "commercial" even if they are primarily for normal use. The classic example of this has been the "four person cab pick-up". However, HMRC are always reviewing whether the "commercial vehicle" definition is being exploited and they tend to clamp down on what they consider to be abuse. A recent example is in respect of the aforementioned pick-ups which will no longer be treated as "commercial" from 6 April 2025.
Here's a quote from a recent tax article -
"HMRC's decision to classify double cab pick-ups as cars for tax purposes from April 2025 represents a major change, increasing tax costs for businesses and employees. Employers may face additional expenses, including higher National Insurance contributions for employees who use these vehicles privately".
Edited by Eric Mc on Friday 14th February 14:04
Eric Mc said:
There is no restriction on the number of vehicles you can have in your own business. However, unless you have a specifically designated business vehicle which is used 100% for business purposes only, then ANY vehicle being used (by default) MUST have a "dual use" aspect to it i.e. it is used sometimes for business and sometimes for private purposes.
If that is the case, any business related claims for these vehicles - whether you are talking about vehicle running costs or capital allowances claims, must have the claims restricted to the business use only element of those claims.
HMRC does not lay out specifically how you arrive at a split between business v' private use but the one they recommend, and the most logical, is to do it on a mileage basis. In other words, if the total mileage in the year for the vehicle was 5,000 miles and 2,000 of that was business related, then only 2/5 of the running costs and capital allowances claims can be made for that vehicle. If you have a second or third vehicle you should apply the appropriate split for that vehicle.
Motor cars and commercial vehicles are treated differently for tax purposes, especially in regards to capital allowance claims. On the whole, the capital allowance regime for cars is is much less generous than for commercial vehicles - but the business/private rules apply to both classes if appropriate. On the whole, most individuals who have a commercial vehicle in their business would rarely use it for private purposes so, in practice, private use adjustments are rare for trucks, vans, JCBs etc.
At the moment, capital allowances on EVs are generous - although that won't last unless the government changes ts mind.
And, of course, there are certain types of vehicles which can be interpreted as "commercial" even if they are primarily for normal use. The classic example of this has been the "four person cab pick-up". However, HMRC are always reviewing whether the "commercial vehicle" definition is being exploited and they tend to clamp down on what they consider to be abuse. A recent example is in respect of the aforementioned pick-ups which will no longer be treated as "commercial" from 6 April 2025.
Here's a quote from a recent tax article -
"HMRC's decision to classify double cab pick-ups as cars for tax purposes from April 2025 represents a major change, increasing tax costs for businesses and employees. Employers may face additional expenses, including higher National Insurance contributions for employees who use these vehicles privately".
Thanks for this Eric! Does it matter that I already owned one of the vehicles before setting up as a sole trader? Can I just transition it into the business and claim the capital allowances and expenses which I would assume would be pro-rata based on when it started to be used within the business? So if the car was introduced on 01/01/2025 then the capital allowance would be 6% of the value split 60% for business and then pro-rata for Jan, Feb and March? And then the following tax year does the value of the car reduce by the pro-rata capital allowance or for the full 6% for the year?If that is the case, any business related claims for these vehicles - whether you are talking about vehicle running costs or capital allowances claims, must have the claims restricted to the business use only element of those claims.
HMRC does not lay out specifically how you arrive at a split between business v' private use but the one they recommend, and the most logical, is to do it on a mileage basis. In other words, if the total mileage in the year for the vehicle was 5,000 miles and 2,000 of that was business related, then only 2/5 of the running costs and capital allowances claims can be made for that vehicle. If you have a second or third vehicle you should apply the appropriate split for that vehicle.
Motor cars and commercial vehicles are treated differently for tax purposes, especially in regards to capital allowance claims. On the whole, the capital allowance regime for cars is is much less generous than for commercial vehicles - but the business/private rules apply to both classes if appropriate. On the whole, most individuals who have a commercial vehicle in their business would rarely use it for private purposes so, in practice, private use adjustments are rare for trucks, vans, JCBs etc.
At the moment, capital allowances on EVs are generous - although that won't last unless the government changes ts mind.
And, of course, there are certain types of vehicles which can be interpreted as "commercial" even if they are primarily for normal use. The classic example of this has been the "four person cab pick-up". However, HMRC are always reviewing whether the "commercial vehicle" definition is being exploited and they tend to clamp down on what they consider to be abuse. A recent example is in respect of the aforementioned pick-ups which will no longer be treated as "commercial" from 6 April 2025.
Here's a quote from a recent tax article -
"HMRC's decision to classify double cab pick-ups as cars for tax purposes from April 2025 represents a major change, increasing tax costs for businesses and employees. Employers may face additional expenses, including higher National Insurance contributions for employees who use these vehicles privately".
Edited by Eric Mc on Friday 14th February 14:04
Simple answer - yes. Assets originally bought privately are often introduced into sole trader businesses. They should be introduced at their estimated market value at the date they were introduced.
Capital Allowances can be claimed on these types of assets.
Of course, you should keep relevant records showing original cost of the vehicle and how you arrived at the introductory values.
Capital Allowances can be claimed on these types of assets.
Of course, you should keep relevant records showing original cost of the vehicle and how you arrived at the introductory values.
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