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Sam
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I am self employed, earning around £14,000 net a year. I

Resolved Question:

I am self employed, earning around £14,000 net a year. I currently use my personal car for business, claiming mileage at the standard rate (40 something p and approximately 6,000 miles per year). However, I am thinking of buying a low mileage used car (around £3,500) to use purely for work to reduce the amount of mileage going on to my personal car.
1. Can I put the purchase of this car towards my tax? Not sure how that would work with depreciation, etc.
2. Can I still claim the standard mileage allowance? And if not, how do I claim mileage?
Or is there a more tax efficient option when purchasing a car in my circumstances.
Submitted: 6 months ago.
Category: Tax
Expert:  Sam replied 6 months ago.

HI

Thanks for your question - I am Sam and I am one of the UK tax experts here on Just Answer.

With the change of car, this allows you the right to change the way you claim the running cvosts on this vehicle, so you can choose to either stay clamming the 45p a mile (for the first 10,000 miles) or the actual method

This will require you to keep details of ALL mileage (so both business and any private) so a percentage can be established that will be attributable to the claim against all the running costs such as fuel, oil, road tax, insurance, servicing and repairs.

You then also can claim capital allowances against he value of the purchase made - and the percentage you can claim (s unless its an energy efficient vehicle you can not claim the purchase value as such value, but a percentage each tax year)

So I have added a link here for you regarding how the capital allowance is calculated - aqnd what percentages you can claim according to the CO2 emissions of the vehicle so scroll down the rates for cars section

https://www.gov.uk/capital-allowances/business-cars

So to recap you claim either

1) The mileage method, 45p a mile for the first 10,000 miles then 25p a mile thereafter OR

2) The actual method, weher you add up ALL the sunning costs of the vehicle and claim the business percentage according to records you keep of business and total mileage - and then also can claim depreciation on the vehicle called capital allowances which are claimed a bit each year according to the CO2 emissions (unless its an enery rfficient vehicle then 100% of the value can be claimed)

Then these two claims on the actual method reduce your tax arising (as they furtehr reduce your net profits) they do not reduce your tax bill directly.

Let me know if I can assist further

Thanks

Sam

Customer: replied 6 months ago.
Thanks Sam, so if I purchase a used car with the sole purpose of using it for the business - ie no personal mileage at all - I cannot put the full cost of purchasing the vehicle against my tax, but can claim for cost of running it; the servicing, the petrol, the insurance, repairs, etc. I do not claim business mileage (at 45p per mile) BUT on top of that I can put 18% of the cost of the car (main rate pool) for the first year? (let's call that option 1)Or can I put 18% of the cost of the car against my tax for one year AND claim 45p per mile (but nothing else)? (option 2)
If I go for option 2 in Year 1, can I switch to simply mileage allowance in Year 2.Does that make sense?
Lynda
Expert:  Sam replied 6 months ago.

Hi Lynda

Thanks for your response

In the scenario you advsie - you cannot claim the full costs of the purchase of the vehicle (only 18% if that's the right percentage for the CO2 emission of the vehicle you plan to purchase) unless its a low energy vehicle.

But if all business usage then you can claim 100% of the running costs

No you cannot claim 18% of the value of the vehicle AND 45p a mile - as already advised - its either the mileage method with just the pence per mile OR the actual method (percentage of business use and the capital allowances 18% value of the vehicle each year)

No you cannot switch method - you chose the method for the life of that vehicle - the only time you can change is

1) When you change the vehicle or

2) When you use the mileage method and then become registered for VAT when you HAVE to change to the actual method, so you can claim the VAT back suffered on the running costs

Let me know if you need em assist furtehr with this question, or if you have all that you need, then it would be appreciated if you could rate me for the level of service I have provided (or click accept)

Thanks

Sam

Sam, Accountant
Category: Tax
Satisfied Customers: 13774
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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