Tax relief for new car?

shays_mum

Hi, can anyone pls help?

A friend of mine is a sole trader & wants to buy a new car, what are the tax implications for this?, i know they can reclaim the vat, but how does that work?.

Also, they won't be using the car everyday, as sometimes its just quicker to jump onto public transport. Can they still claim for travel on public transport?

Also, can you buy any car?, they were looking at a 4x4/mpv as they need the space to convoy things between work sites (they are in construction) & as they have kids, is good for that as well.

Any help is much appreciated. Thanks in advance

WHA

They CAN'T reclaim the VAT on a car - it's specifically disallowed by statute.

They can only claim the "business use" proportion of the car costs, including, finance and running costs. So if they use it for "business" purposes for say 50% of the total mileage (the other say 50% being private use), they can only claim 50% of its costs as an expense.

The original purchase price is not a deduction as an expense at all, but you can claim "capital allowances" of 25% each year as a deduction against taxable income upto a maximum of £3,000 p.a.

Yes, they can still claim the travel costs when the car isn't used.

The only difference would be if it was a "van" which includes some of the larger crew-cab pick-up trucks where the capital allowances would be more generous.

thePhilster69

What if they were to lease the vehicle? Isn't that 100% tax-deductible?

I'm currently considering becoming a full-time freelancer, and had thought of leasing a car for the business and selling mine to raise funds for the business. Am I right in thinking that I can write off the cost of leasing the car? What about Benefit In Kind payments? Are they only for people paid through PAYE, and not sole traders?

TIA
Phil