From Self Employed back to Employed

Lisa1978

Hi All, my husband went self employed in April 22 (well working for someone else and them paying him but him sorting his own taxes).  Hes done 11 months but has decided to go back to an employed job.  He will complete a SA tax return for the year however he purchased a work van last year.  Can this be used to reduce the tax due? 
Also what will happen regarding a tax for this new job? He will ring HMRC this week and advise he is no longer self employed but they haven't yet received a tax return with April 23 not yet up.  Thanks 

Dazed_and_C0nfused

He needs to complete a new starter declaration for his new employer.

That will determine which tax code they will use for him.

Lisa1978

Dazed_and_C0nfused said:

He needs to complete a new starter declaration for his new employer.

That will determine which tax code they will use for him.

Thanks.  Any idea on the van question? ideally i was expecting that to but on the SA and his tax to be lower for the next few years but unsure what happens now he's going back to employment. 

[Deleted User]

Lisa1978 said:

Dazed_and_C0nfused said:

He needs to complete a new starter declaration for his new employer.

That will determine which tax code they will use for him.

Thanks.  Any idea on the van question? ideally i was expecting that to but on the SA and his tax to be lower for the next few years but unsure what happens now he's going back to employment. 

It can be used to reduce the tax due. It would work like this - let’s say that he uses the van 80% for business and it cost £12000.

He can claim a first year allowance of £9600 (80% of £12000) against his self-employed income for 2022/23. 

However, as he is ceasing in that tax year, the value of that van will need to come back into play. Let’s say that it us worth £10000. 80% of that is £8000. If he sells it, use the sale price.

Overall the claim would be £1600. 

He could also claim 80% of running costs - insurance, fuel, repairs etc. 

However, if your husband uses simplified expenses he can only claim a mileage rate as attached - nothing else! This may be the way to go - 10000 business miles would result in a claim of £4500 and the only records that would need to be kept are mileage records. 

https://www.gov.uk/simpler-income-tax-simplified-expenses/vehicles-

Lisa1978

Many thanks! I wasn't initially going to go the simplied expenses route and have kept all fuel receipts etc but it may be the best way to go! He's also not for selling the vehicle at present.  He may kept it another 3 years or so and by then he wont be doing SA tax returns so unsure how that would work! Thanks 

[Deleted User]

Lisa1978 said:

Many thanks! I wasn't initially going to go the simplied expenses route and have kept all fuel receipts etc but it may be the best way to go! He's also not for selling the vehicle at present.  He may kept it another 3 years or so and by then he wont be doing SA tax returns so unsure how that would work! Thanks 

I agree that the simplified expenses may be easier and maybe cost effective. 

On the van - he doesn’t need to sell it. The value at cessation is brought into play. He can do what he likes with the van afterwards - it’s irrelevant as it is a personal asset after the business has ceased.

Lisa1978

That makes sense! Thanks! 

[Deleted User]

Lisa1978 said:

That makes sense! Thanks! 

Just to be clear - it’s mileage rate under the simplified expenses method with no other claims OR

claim all motoring expenses including van as outlined. 

Lisa1978

Defo the £4500 would be better in his case.  Does he have to prove he did 10k miles in the year as he didn't keep mileage records. 

[Deleted User]

It’s certainly not helpful not to have kept records but that shouldn’t necessarily prevent any reasonable claim. 

Try this comparison tool.

https://www.gov.uk/simplified-expenses-checker

Jeremy535897

I think this may need further thought. Purdyoaten is correct when he says that the business proportion of the van's reduction in value from the date it entered the business (or purchase price if bought after he started trading) to the date he ceased the business, and of course that becomes irrelevant if a mileage claim is to be made. The question is what is business mileage? The best outcome is where he goes straight from home to varying job sites, travels between job sites or building suppliers etc, and comes home, never using the van for a private journey. In that case the odometer will give you the business mileage when he ceases trading on his own account. If the van is used for an occasional trip that is not business related (for example using it to collect a television), that mileage is deducted. At the other extreme, if he went to the same workplace day in day out, that would probably become commuting, and not be allowable at all.

Without mileage records, and with mixed use, he will have to estimate his business mileage, but presumably his bills and his work diary will remind him where he went on business and when. Google Maps can find the distance involved. HMRC might challenge the claim, but I would be surprised if they did (they simply haven't the resources), and if he has gone to the sort of effort I describe, he can argue his case if it comes to that.