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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I'm a sole trader in my fourth year trading and would like

Customer Question

I'm a sole trader in my fourth year trading and would like to know how best to put my car through as a purchased item as I'm currently completing my tax return. I've so far not put a car purchase down on my tax returns but have just finished paying for
it (this financial year) but as 80% of its use is for business I thought this would be fine. However I'm not sure how best to do this, I assume it goes as a capital expenditure but as I've not put through previously can I bring some of the cost from previous
years into this years accounts or do I take a market value cost of the car at the time of these accounts or do I just look at the payments made throughout the financial year etc The car cost £9,000 second hand in September 2011 and final amount paid is about
£11,000 Kind regards Paul
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi.
Unless you want to amend your last tax return, you should bring the car into your latest accounts at its current market value.
As for tax relief, you can either claim capital allowances on the value introduced together with the running costs with a disallowance for private usage or a mileage allowance which is a simple system designed to be used instead of claiming capital allowances and the running costs.
Capital allowances are claimed on a car until the cost is written off or it is disposed of or no longer used in the business whereas a mileage allowance for business travel can be claimed as long as you use the car for business.
Whether you use capital allowances or the mileage rate method, you can claim the business percentage of the finance costs as an expense in the year you introduce the car into the business. Usually, you would do this from the start.
You can read about capital allowances on cars and find the rates at the links below:
https://www.gov.uk/capital-allowances/overview
http://www.rossmartin.co.uk/capital-allowances-75082/315-capital-allowances-rates-and-allowances
The mileage allowance rates can be found here:
https://www.gov.uk/simpler-income-tax-simplified-expenses/vehicles-
I hope this helps but let me know if you have any further questions.

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