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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15950
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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hi im self employed and im just going to buy a mitsubushi l200

Customer Question

hi im self employed and im just going to buy a mitsubushi l200 commercial pick up at 12000 pounds on finance. I earn 1080 a week before my 20 percent tax stoppage. its for work use only. will I be able to claim some of the price of the pick up back at the end of the next tax year?
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.

Hi.

If your business turnover is less than the VAT threshold at the time you acquire the vehicle, you can if you wish claim the mileage allowance for business mileage at the rate of 45 pence per mile for the first 10,000 miles and 25 pence per mile thereafter. This saves you from having to record all your motor expenses. You would still claim for road tolls, parking and loan finance costs such as interest. Take a look at the notes here for more information. This is an alternative to the capital allowances system.

 

If your business turnover is more than the VAT threshold at the time you acquire the vehicle or you don't want to use the mileage allowance system, you can claim capital allowances. Read about those here. You could if you wish write off the full cost of the vehicle against the profits of your business in the year you bought it under the Annual Investment Allowance rules. The downside to this is that whilst you get a nice tax break up front, if you sell the vehicle your allowance will be restricted to the net cost of the vehicle so if you claimed a deduction of £12,000 and you sold the vehicle later for £4,000, there would be a clawback of the excess allowances given, £4,000.

 

You could claim a writing down allowance instead of the annual investment allowance at a rate of 18% per annum on the reducing balance of the cost of the vehicle. So, in year 1, the allowance would be £2,160 (£12,000 x 18%). In year 2 the allowance would be £ 1,771 (£12,000 - £2,160 x 18%). In year 3 the allowance would be £1,452 (£9,840 - £1,771 x 18%). You would carry on like that each year until the whole cost had been written off or the vehicle had been disposed of in which case there may be a balancing allowance or a balancing charge.

 

If you claimed capital allowances, you would also claim for the running costs of the vehicle which contrasts with the mileage allowance system. With the mileage allowance system, however, you would continue to claim that long after the vehicle had lost most of its value whereas you get a finite amount of capital allowances.

 

I hope this helps but let me know if you have any further questions.