Sole Trader - Buying a Car

Mimi86

Hi,

I am self employed and need to buy a new car. I have been reading the HMRC website and from what I understood if I buy a car with a emission rate <75g Co2 i can claim a first year allowance of 100% (of the business use)

I'm slightly confused about this. So the hybrid car I'm looking at costs £30000 - toyota Prius Hybrid Plug IN. I want to buy it outright. I use my car around 75% for business use - does this mean I can write 75% of the cost of the car against the profits of my sole trader account?


Thanks for your help.

CKhalvashi

I can’t help to answer the question as I don’t know the answer, however the Prius has a co2 rating over 75g/km.

Personal car usage rules I believe are a taxable benefit, however as above, I operate through Ltd companies.

00ec25

your understanding is correct.
the car will form a single asset pool and attract either the first year allowance or the 18% (or 8%) writing down allowance depending on its Co2 value.

that allowance would then be adjusted by your business use %

however, as mentioned above, a toyota prius hybrid plug in is rated as 120g/km co2
http://carfueldata.direct.gov.uk/search-new-or-used-cars.aspx

as such you would not get first year allowance and could only claim 18% writing down allowance x 75% business use

so your WDA would be 30,000 x 18% x 75% = £4,050

in year 2 your WDA would be (30,000-4,050) x 18% x 75%
and that would then carry on until you dispose of /sell the car

Aquamania

Mimi86 wrote: »

Hi,

I am self employed and need to buy a new car. I have been reading the HMRC website and from what I understood if I buy a car with a emission rate <75g Co2 i can claim a first year allowance of 100% (of the business use)

I'm slightly confused about this. So the hybrid car I'm looking at costs £30000 - toyota Prius Hybrid Plug IN. I want to buy it outright. I use my car around 75% for business use - does this mean I can write 75% of the cost of the car against the profits of my sole trader account?


Thanks for your help.

This really is something you should consult your accountant over.

You are generally correct, and I see that 00ec25 has already explained some of the errors you did make.

Following on from the comments that 00ec25, if your WDA is £4050, then remember all that does is reduce your profit.

Assuming you are a 20% tax payer, that would mean you get £810 tax benefit in year 1, (and some more in later years) based on buying a brand new car costing £30,000

I'm sure you are aware that buying any brand new car will lose over £810 before it is even driven off the forecourt, let alone one costing £30,000.

Returning to the basis of your original question relating to 100% write down in the fisrt year for low emission vehicles, it would appear that the official government website has not been updated with the latest developments.

Whilst the emission levels were needed to be <75 g/km, I understand these levels were further reduced to <50 g/km for vehicles purchased after 01 April 2018
https://www.informaccounting.co.uk/blog/first-year-allowances-for-cars
(unless that change was never introduced - again something your accountant will be able to advise you on)

It only applies to brand new vehicles.

Furthermore, if you seek to benefit from any of these WDA, you will not be entitled to claim the simplified mileage allowances (45p/mile for first 10,000miles pa, 25p thereafter) which may be a better option for you.
(but there may be other expenses you could offset against tax instead - again something your accountant would need to advise you on)

10,000 miles @ 45p/mile would allow you to offset your profits by £4500 per year