Sole Trader Purchasing a new van.

[Mark Burchell]

Good morning all,

Just looking for some advice if anyone has a spare moment.

I started my business in Oct 2015 and started with my small van which I purchased 2nd hand. I found the last year I've been having to rent a larger van quite a lot. So I'm currently investigating how cost effective it will be to purchase a new larger van. If I can charge some of this against tax and if so how much. Apologies for asking as I have done some Googling but get so confused with the whole thing.

Thanks
Mark

 

[STDFR33]

Are you a sole trader or limited company?

 

[Mark Burchell]

Hi there, I'm a sole trader.

Thanks

 

[STDFR33]

Claim the % based on the business use.

For example, if the van would be used 20% of the time for personal use, yu can only claim 80% of the costs on your tax return.

 

[Mark Burchell]

The van will be 100% business use as we have a separate family car.

To try and get this into my head an example:

I'm likely to owe around 12k(which I've saved in a different account) in tax coming up. If I was to spend 10k on a new van I could offset it against my tax so I'd owe 2k and basically use the tax money against a vehicle for business?

I know this probably sounds incredibly stupid as it sounds too good to me. As you can see I'm still new to all this and have a huge amount of trouble getting my head around HMRC/Tax etc

I do also have an accountant which I have a meeting with soon but trying to figure things out sooner so thank you so much for taking the time to answer me stupid questions

 

[STDFR33]

Do you mean you owe £12,000 in tax, or you have made taxable profits of £12,000?

 

[Mark Burchell]

I will actually owe 12,000 roughly to HMRC.

 

[STDFR33]

For simplicity, we will just assume you are a basic rate taxpayer @ 20% and ignore all timing differences, and ignore whether or not it would be beneficial to claim WDA or AIA etc etc etc. So we are just going to be looking at a very basic example.


£12,000 due in tax prior to purchase.

£10,000 van purchase.
£2000 tax relief on van purchase (£10,000 x 20%)

£10,000 tax now due (£12,000 owed less £2000 tax relief on van purchase).

 

[Mark Burchell]

That's fantastic. Thank you once again for clearing that up.