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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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I am selfemployed taxi driver and bought brand new car with

Customer Question

Hi, I am selfemployed taxi driver and bought brand new car with low emmision to claim First Year Allowance but I would like to apply for a mortgage within a year and I read that bank will use my taxable profit to calculate my mortgage amount but it meant that i i claim my first year allowance, I will have no taxable profits left so the bank will not give me any morgage. Can I claim this allowance in a year or two when I already have a morgage? I would appreciate your help
Assistant: The Accountant will know how to help. Is there anything else important you think the Accountant should know?
Customer: I think this is it
Submitted: 4 months ago.
Category: Tax
Expert:  TonyTax replied 4 months ago.

Hi. My name is*****'m looking at your question now and will post my answer or ask for more information here in a short while.

Customer: replied 4 months ago.
ok, many thanks
Expert:  TonyTax replied 4 months ago.

You can only claim First Year Allowance or Annual Investment Allowance for 100% of the cost of the car in the year you bought it I'm afraid. You could claim a reduced FYA or AIA for the first year and writing down allowances in future years. I'm not sure your mortgage people would understand that the one off big capital allowance claim in year 1 which would significantly reduce your taxable profit was just that, a one off.

Instead, you might claim writing down allowances whereby you claim 18% of the cost of the car in year 1 and 18% of the reduced balance in years 2, 3, 4 et seq until you have written off 100% of the cost of the car. So, in year one on a £20,000 car, you could claim a writing down allowance of £3,600 which would leave you with a written down value of £16,400. In year 2, you could claim a writing down allowance of £2,952 which would leave you with a written down value of £13,448.

Take a look here for information on First Year Allowances and the Annual Investment Allowance.

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

Customer: replied 4 months ago.
ok, it makes sense, I will still make profit rather than no profit at all but will pay less tax for number of year. In year 1, can I only claim WDA on 18% or I can claim a bit more and then from year 2 I would claim 18% on the balance?
Expert:  TonyTax replied 4 months ago.

You never need to claim the entire capital allowance available. You can claim a reduced sum which leaves more to claim in later years.

You can claim a bit of AIA in year one and WDA at 18% of the balance. AIA is only available on low emission cars, however. I don't think you can claim both a first year allowance and a writing down allowance as you can with AIA.

Customer: replied 4 months ago.
my car is a brand new Toyota Prius a hybryd car with emmison less than 75
Customer: replied 4 months ago.
i hae just checked the link you gave me and I can see:If you don’t want to claim the full costIf you don’t want to claim the full cost, eg you have low profits, you can claim:writing down allowances instead
part of the cost as AIA and part as writing down allowancesI would go for claiming part of the cost as AIA and part as writing down allowances but just to double check- the car i bought was a brand new Toyota hybrid car with an emmision less than 75g/km, i use it solely for a busines and I bought it for it purposely for my busines so is thi option allowed for me?
Expert:  TonyTax replied 4 months ago.

I'd claim FYA not AIA for your car unless it is a black cab. AIA s normally restricted to cars that are black cabs or that have been converted for driving instruction. As far as I can see you cannot mix FYA and WDA.

The danger with a big initial claim is that there may be clawback of allowancer if you sell for a high resale value.