Self employed newbie - calculating allowances?

luckydip_3

Hi

I have recently become self employed and have been reading about what allowances I can claim. At the moment I believe I can claim 40p per mile for business use. However, I am looking to buy a car as my current one is on its last legs. If I bought a car costing £10k would I treat it as follows?

1) Capital allowance 25%(as its not low emmision) = £2500 assuming 100% business use
2) Claim full cost of insurance, road tax and any associated costs (repair, service) etc

In year 2 would I then claim 25% of £7500 and so one?

I would also need to purchase a sat nav and a laptop. Would these be classed as equipment and treated at 40% in year 1?

Cheers

nzmegs

In your first year you can claim 50% of your capital allowances and 25% for subsequent years. I have just done my husbands self assessmnet for his first year and it can be confusing but I am sure that 50% is correct. Not too sure about equipment though. We already had those things and decided not to claim as the business use was so limited.
Good luck.

dipsomaniac

if you are claiming business miles i don't think you can also claim capital allowances. the mileage rates allow for motoring expenses and depreciation.

you can claim capital allowances for the business use of sat nav and laptop.

i am not a tax expert so stand to be corrected

ckerrd

If the car is to be used solely for business then you can claim the insurance, road fund licence, breakdown membership etc.

However if it is for part business part non-business use you need to calculate the proportion of business use and you can claim that percentage on the above.

HMRC run some excellent free courses on self assessment for the self employed. Well worth attending.

BoGoF

dipsomaniac is correct. You cannot claim the 40 pence per mile plus capital allowances and road tax etc. The 40 pence a mile rate is supposed to cover the total running costs of the vehicle not just fuel - after all most cars don't consume 40 pence of petrol a mile do they, you think HMRC are that generous. You will have to decide what option is most benficial to you because once you have decided what method you cannot then change it in future.

luckydip_3

Thanks for the replies. I know that I cannot claim 40p and cap allow. As I said my car is on its lasts legs so I am thinking of buying another,hence, claiming that as cap allow.

I need clarification on how to treat the car in year 1, year 2 etc. What % can I claim?

With regards to equipment is it 40%? How do I treat these in year 2 etc?

ckerrd

There are First Year Allowances which in the case of a car used solely for business would be 50%. After that you get Writing Down Allowances for each subsequent year. (25% of the residual value)

Speak to HMRC they are very helpful, as is their website.

luckydip_3

Went to the local tax office for clarification regarding capital allowances. They were useless. I asked about whether a car would be taxed at 25% or 40% in year one. He said it could be either and I needed to talk to the inspector as it was a technical query. I asked for the number but he said I had to make an appointment at the local office and they would then use their 'special number' to contact him. He could not give this number to me. Is this correct or are they telling me porkies?

wayhay

BoGoF wrote: »

dipsomaniac is correct. You cannot claim the 40 pence per mile plus capital allowances and road tax etc. The 40 pence a mile rate is supposed to cover the total running costs of the vehicle not just fuel - after all most cars don't consume 40 pence of petrol a mile do they, you think HMRC are that generous. You will have to decide what option is most benficial to you because once you have decided what method you cannot then change it in future.

My accountant told me that you can change your method each year. I've been doing the mileage method for the first 2 years due to using low value vehicles, but when I buy a new vehicle later this year I will do the capital route for this years tax return

ckerrd

luckydip wrote: »

Went to the local tax office for clarification regarding capital allowances. They were useless. I asked about whether a car would be taxed at 25% or 40% in year one. He said it could be either and I needed to talk to the inspector as it was a technical query. I asked for the number but he said I had to make an appointment at the local office and they would then use their 'special number' to contact him. He could not give this number to me. Is this correct or are they telling me porkies?

The HMRC run courses to help people who have become self employed.
I am surprised that they did not send you details when you registered.
The people you want are part of the Business Support Team, but I believe that name is changing soon.
http://www.hmrc.gov.uk/bst/work.htm - list of types of courses

chugalug

Thanks, just signed up for my free courses!!!