Self employed and HP Finance Tax claim

Hux

I have just set up as self employed sole trader and have brought my van on HP(yes I know) :eek: what I trying to find out is what can I claim back or offset and fuel and running costs payments etc.

I have read so many websites my brain hurts!!! they all say different things about this and that then you get the bit about 50% 1st year then 25% second year and so on ?????

Many thanks Hux

Sorry I put in the wrong section last time

Pennywise

If it really is a "van", i.e. following HMRC definition, then you get 100% tax relief as a capital allowance in the year of purchase, reduced pro-rata for any non-business use, so if you use it for business only half its mileage, then you can only claim half of your 100% capital allowance.

Same rule applies for all its running costs, i.e. fuel, insurance, road tax, repairs, HP interest - proportion of business use is claimable as a business expense.

The only thing to make sure is that you've really got it on HP and not on some form of lease, - i,e, make sure that you've actually bought it and own it rather than the finance company owning it and leasing it to you.

Whatever capital allowances and allowable running costs you can claim are deducted from your taxable business income. So you get tax relief on the costs, which if you are a basic rate taxpayer will be 28%, so for every £1000 it costs you for business use, your tax bill is reduced by £280.

Also, as you get 100% deduction in year of purchase, make sure that you are claiming working tax credits - such a large deduction may make your household income small enough to qualify for working tax credits for the year of purchase and the following year which can easily amount to several thousand pounds if you have a relatively low household income anyway.