New business needs car please help.

dicksmith · Dec 17, 2008

Hi all, please help.
This year i will earn £40000 from employment and £10000 profit from my new business (I am not vat registered).
I want to buy a car with emmissions less than 120g CO2 for £12000.
Will this put my business at a £2000 loss and get me some tax back from that which I have payed in my employment.
What will the car cost me in real terms.
My current car is used around 80% for business use but I have no idea what % business use will be next year. (this year I have done around 10000 business miles).
Once my business has purchased a car can I still claim the 40p/mile or must I claim a % of the running costs.
I will be grateful for any help with this.
Richard

accountancyextra · Dec 17, 2008

Hi Richard,

Is your business trading as a sole trader or a limited company. It's an important differentiation for this question.

Are your 10,000 business miles all from your business or are some incurred via your employment?

dicksmith · Dec 17, 2008

Hello Stuart,
I am operating as a sole trader and the 10000 miles refered to are what I will have covered by the end of this tax year from my self employment and not from my job.
Cheers
Richard

MyAccountantOnline · Dec 17, 2008

In you posistion you have a choice with motor expenses - you either

1. Claim the percentage of actual costs of running your car ie fuel, repairs, servicing, insurance etc and capital allowances (an allowance for wear and tear) which relate to business use eg if you did 20,000 miles pa of which 10,000 were solely business use you would claim 50% of the costs or

2. Claim 40p per mile for each business trip up to 10,000 miles and 25p per mile for anything over 10,000 miles.

Which you do will ultimately depend on your actual mileage, car running costs, the car you ultimately buy etc.

It really is a good idea to get advice like this when you are starting in business from an accountant - they can also give you advice on lots of other important matters, many of which can save you tax!

dicksmith · Dec 17, 2008

Thank you Nichola,
But what I really want to know is more to do with the purchace.
I guess from my self employment I will owe the tax man £4000 so will buying a £12000 car (with less than 120gCO2) get me off paying him the £4000 and get me a rebate from the tax i've payed from my employment.
If I have done around 10000 miles to run my business this year. I do not have a clue how many I will do next year but I guess that if I buy a car to share between personal and business use it will be around 80% business use, but if I claim 100% capital this year does it matter what milage I do next year.
This is soo confusing for me.
Richard

Zeno · Dec 17, 2008

You are letting the tail wag the dog. Unless you actually need a new car you should not buy one because of the tax relief. In real terms the car will cost you £12K. The relief for the car (You will not get relief of 100% unless it is uses 100% for business, if used 80/20 business then you will get relief of £9,600) lower your tax liability. There will be no rebate based on what you have said.

As Nicola said, you cannot claim capital allowances and use milege on the same vehicle.

dicksmith · Dec 17, 2008

Thanks Zeno,
Think I was kinda hoping you would tell me that I would no longer need to pay the 4k tax and I would get 2k back from the tax man, so in effect get a 12 grand car for 6 grand.
If it sounds to good to be true it probably is eh.
Cheers

stphnstevey · Dec 21, 2008

Plus benefit in kind tax for Number (1)

David Griffiths · Dec 22, 2008

stphnstevey said:
Plus benefit in kind tax for Number (1)

That doesn't apply to a sole trader or partner.

Private use is reflected in the percentage of costs and capital allowances claimed.

stphnstevey · Jan 3, 2009

David Griffiths said:
That doesn't apply to a sole trader or partner.

Private use is reflected in the percentage of costs and capital allowances claimed.

No BIK for company cars for sole traders or partners? Sounds a bargain then!

Does BIK only apply to Ltd companies then?

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