SB - Do I put through the car the business?

heatherbelle_3

Hi all!

I have had my business now for 2 years - only done one lots of accounts etc and still new to all this! I am also a girl so know nothing about cars and emissions

Last year I did about 4,500 miles with my business in my personal car.

I bought a Vectra 1.8litre (06 plate) last week at around £5,000 and I am not sure how to now deal with the car.

Can I put it through the business books - this means I could only claim 10p per mile tax reflief right?
Or should I stick with my 40p a mile and have it as my personal car still?
How would I put it through the books? I know it relates to the emissions and what I can claim that as cost?
If I changed it to a business owned car do I just reflect all mileage done before 1st Feb as 40p per mile in accounts, and then 10p a mile after?

I am hugely confused

Pennywise

Before anyone can help, we need to do whether you are in business as a sole trader or whether you are operating via a limited company.

fengirl_2

Are you a limited company or a soel trader?

heatherbelle_3

I've actually been out working today so sorry for the delay...

I am a sole trader

heatherbelle_3

any advice?

fengirl_2

With use of car in your business you have two alternatives. Once you pick one, you can only change once.
1. You include in your accounts 40p pm for the first 10,000 business miles and 25p pm thereafter. I dont know where you have got the 10p from. For this method, you just need to keep a record of business miles and do the arithmetic at the end of the year.
2. You include in your accounts all your motor running costs - fuel, oil, MOT, insurance, repairs, etc. When you do your self assessment, you add back on your return the private element of vehicle use. Its up to you to estimate this, but it should be based on some sort of workings, maybe based on a quarter of the year's mileage. In addition, you claim capital allowances on the value of the car, again reduced by privte use.
If you ever become VAT registered you must use alternative 2.
As you are a sole trader, the business and you are one and the same, so there is no formality in putting it through the business, you just do it.

heatherbelle_3

DOn't know where I got 10p from - though it doesnt matter as I don't do over 10k in a year.

If I use last year for example I did 3,500 miles in my business (I have it precisely thru my accounts and have no problem keeping note of that) But overall I did approx 8k in personal mileage through the year - around 12k throughout the year. I travel Scotland - London a few times in the year to see family so it starts to add up!
So how do I work out the capital allowance on the new car at £5,000?
business allowance is 1/4 of the car amount? all petrol and insurance, mot, service, repairs?

fengirl_2

Capital allowances are 20% of the cost of the car. You then deduct the privte proportion - in your case it seems to be 2/3rds. All other car costs you include in your accounts in full and then adjust for private use in your self assessment by adding back the 2/3rds.

heatherbelle_3

Thanks fengirl.
Hmmmm. I maybe better off with the 40p per mile
3500 miles = £1400
vs
20% of £5000 car = £1000 - 1/3 of that = £333 (i can only claim that in my first year right? no depreciation over next few years?)
the car is under warranty for next 2 years so all I'll have to pay is MOT and servicing = £150ish(£50 business)
Insurance = £500 (£166 business)
and then 1/3 of petrol costs on top of that?

Its very confusing. I might stick to 40p a mile.

fengirl_2

You may be right - I would always advise that you keep records under both methods and include the most beneficial. Capital alloances are claimed each year you use the car - 20% on the reducing value of the vehicle less private use.

heatherbelle_3

Thanks fengirl - appreciate all your help.
I will basically keep all my petrol receipts(I claim a 1/3rd of these too?) and make a decision come April. I'm guessing as I will only have the car for Feb/March of this current tax year I can't claim the full 20%?
It may therefore be more beneficial next year when I can claim the full year.