Sole trader / Car: Tax breaks and so on

MicktheMiller

Hi all,

My partner is a fitness instructor. We moved out of London recently and now find a car is needed for both family use, and also to get her around to classes in neighboring towns and so on. We dont have the cash for a car (and driving lessons) up front, so will be looking for finance, and also looking to maximise any available tax breaks and so on to cut overall costs.

She is a sole trader. I wonder if anyone has experience of sorting out a car in a similar situation and can share some wisdom on the best way to make the numbers work for us.

Thinking a small business loan/car financing deal/tax relief/running cost tax claims are the types of moneysaving that could be applicable.

I have checked the info at www. taxaid using-your-private-car-for-work (cant post link as I am a noob but searching on the above will show you what I mean) and whilst useful on the running costs issue it doesnt help much with actually buying the car, and how best to save there.

Thanks in advance for any replies.

Mick.

Aquamania

MicktheMiller wrote: »

Hi all,

My partner is a fitness instructor. We moved out of London recently and now find a car is needed for both family use, and also to get her around to classes in neighboring towns and so on. We dont have the cash for a car (and driving lessons) up front, so will be looking for finance, and also looking to maximise any available tax breaks and so on to cut overall costs.

She is a sole trader. I wonder if anyone has experience of sorting out a car in a similar situation and can share some wisdom on the best way to make the numbers work for us.

Thinking a small business loan/car financing deal/tax relief/running cost tax claims are the types of moneysaving that could be applicable.

I have checked the info at www [link removed] (cant post link as I am a noob but searching on the above will show you what I mean) and whilst useful on the running costs issue it doesnt help much with actually buying the car, and how best to save there.

Thanks in advance for any replies.

Mick.

She should first pass her test. For some people it can take years, and the occasional person never does achieve success.

Once successful, she should look to buy a car she can afford. Don't forget insurance! It'll cost a small fortune for a newly qualified driver, especially if she wants to insure it for business use too.

In the meantime, perhaps she could use a taxi to get to her classes if there is no alternative. Don't forget to get receipts as the cost can be offset against business profits for tax purposes

MicktheMiller

Car is essential for us now, as we have 2 kids.

In the meantime she is teaching locally but a car would enable her to teach more private clients (at a better hourly rate) and access a wider pool of areas in which to base classes. She is specialised so many places wont have a teacher with her expertise.

Taxi rides/other transportation will not add up financially when you consider all the other times we need a car (supermarket runs, visiting relatives and so on). Its a convenience thing. Sick of taking 3 trains to get to In-laws, loaded up with presents at christmas. Sick of relying on others to get us about generally. We are Mid 30s so insurance wont be as expensive as for younger new drivers.

Appreciate that not everyone passes, especially first time but have to assume that one of us will, and will allow a generous budget for that (any unspent amount can be used for car insurance, tax and whatnot).

Just trying to make the whole thing as cheap as possible, but it needs to happen regardless. Any tips (especially on the possible use of sole trader status to offset costs) would be gratefully received.

Thanks anyway for response. :):)

zygurat789

MicktheMiller wrote: »

Car is essential for us now, as we have 2 kids.

In the meantime she is teaching locally but a car would enable her to teach more private clients (at a better hourly rate) and access a wider pool of areas in which to base classes. She is specialised so many places wont have a teacher with her expertise.

Taxi rides/other transportation will not add up financially when you consider all the other times we need a car (supermarket runs, visiting relatives and so on). Its a convenience thing. Sick of taking 3 trains to get to In-laws, loaded up with presents at christmas. Sick of relying on others to get us about generally. We are Mid 30s so insurance wont be as expensive as for younger new drivers.

Appreciate that not everyone passes, especially first time but have to assume that one of us will, and will allow a generous budget for that (any unspent amount can be used for car insurance, tax and whatnot).

Just trying to make the whole thing as cheap as possible, but it needs to happen regardless. Any tips (especially on the possible use of sole trader status to offset costs) would be gratefully received.

Thanks anyway for response. :):)

There are two main ways of charging a car to your business.
1. Own the car privately and charge 45p per mile for the first 10,000 miles and 25p per mile thereafter.
2. The business owns the car and ALL expenses are put through the business accounts. The private percentage of private miles to total miles in the year is then added back to profits for taxation

Which is best for you is impossible to say until you have some sort of budget.
If the business owns the car then the expenses allowable may include hire purchase interest or lease payments.
you may not get tax relief on all your expenditure if, for instance, taxable profit did not exceed £10,000.
My conclusion would be to buy a car you know you can afford use method 1 above. When you have more actual information (c2years) you can do the calculations.

Aquamania

MicktheMiller wrote: »

...
Taxi rides/other transportation will not add up financially when you consider all the other times we need a car (supermarket runs, visiting relatives and so on). Its a convenience thing. Sick of taking 3 trains to get to In-laws, loaded up with presents at christmas. Sick of relying on others to get us about generally. We are Mid 30s so insurance wont be as expensive as for younger new drivers. ...

She can only claim for a tax deduction for mileage/proportion of car expenses wholly & exclusively used for in the performance of her business.

You are correct that the insurance is likely to be lower than that of a younger inexperienced driver, but nonetheless it will still be very expensive for a newly qualified, inexperienced driver with no NCD no matter what the age.

A cheap car can be purchased for £100. Even so, expect the insurance to cost £1000s p.a. in the situation you describe especially when business use is added.

Even for an experienced driver with full NCD, the use of a car is often a luxury and will not compete with the lower cost of public transport.
So if the cost of public transport makes the expansion of the business unviable, the addition of a car will not be the solution ... especially if it has to be paid for on the never, never.

MicktheMiller

"My conclusion would be to buy a car you know you can afford use method 1 above. When you have more actual information (c2years) you can do the calculations".

Thanks - thats very helpful. We will look to do as you say, I think it makes sense to do so. In case anyone else needs help I also found a forum search on MSE for "Financing new car - which option" had a useful thread.

MicktheMiller

Aquamania wrote: »

Even for an experienced driver with full NCD, the use of a car is often a luxury and will not compete with the lower cost of public transport.
So if the cost of public transport makes the expansion of the business unviable, the addition of a car will not be the solution ... especially if it has to be paid for on the never, never.

Fair points made in your response - and thanks for taking the time.

I get the feeling you misunderstand somewhat, its not really about the business case for buying or not buying the car here. For what its worth anyway; the cost of public transport per se isnt makes using it unviable, its the fact that many areas locally arent served at all by public transport, and when they are they may involve considerable journey time, changes, and so on, all of which isnt just inconvenient, has to be paid for (both cost of travel and babysitter).

Then theres the fact that we want a car for getting around, too. I feel that it would improve our quality of life sufficiently enough to outweigh cost impacts. Its not a case of weighing up whether to do it, that decision has been made.

The thing is, we have enough money to fund this loan or finance deal, whatever we do. Looking to do things as efficiently as possible, which is where I started thinking about using a bit of creative accounting to factor in the business use of the car (had previously just thought "We'll just buy it and use it as we wish").

With 2 small kids I dont want a car that costs £100, I'd prefer something a bit more reliable etc.

You are right to urge caution though, and I am grateful. Insurance sounds like a !!!!!!, and hadnt thought it would cost as much. Perhaps we'll start with a slightly cheaper motor and look to upgrade further down the line. Thanks again.

Mick

Savvy_Sue

As for passing your tests, years and years ago my late father did an intensive week's driving course. It wasn't cheap, and he decided not to take his test at the end of it (to our considerable relief!) but they did have quite good % pass rates.

MicktheMiller

Thanks Sue, yes I think intensive is the way to go, getting lessons all done quickly and testing knowledge whilst still fresh in the mind. Funny that your pop never took the test after learning!

Was rather hoping hover-boards would have been invented by now. Sadly Hollywood seems to've lied to us yet again.

All the best.

Mick