EV purchase, self employed, tax position?
Discussion
I'm still working self-employed, but also getting my state pension and a couple of DB company pensions from when I was PAYE.
I'm currently using my own personal car (bought used) for the business, mileage is split 30% private, 70% business. I'm just claiming the 45p a mile against profits on my self assessment. Plug-in hybrid, using a granny charger.
As I understand it, the self employed can buy a new EV, and offset the entire cost (or a pro-rata proportion for business use) against tax in the first year, and also claim the 45p a mile?
Seems it's also possible to offset the cost of getting a charger installed?
Thing is, my profit from the business is only around £10k a year.
I also pay income tax, deducted by the scheme administrators, on £12k a year company pensions.
Most of my personal allowance gets used by the state pension, around £11.5k.
Can I offset the cost of the car against my company pension income, or just the business income?
The car will cost way more than one year of income. Can I carry that forward as a "loss", and offset it for future years?
Presumably I would be liable for tax when the car gets sold?
Does this liability carry on forever, or is the a "write down" time limit?
What happens if I stop the self employment?
I'm currently using my own personal car (bought used) for the business, mileage is split 30% private, 70% business. I'm just claiming the 45p a mile against profits on my self assessment. Plug-in hybrid, using a granny charger.
As I understand it, the self employed can buy a new EV, and offset the entire cost (or a pro-rata proportion for business use) against tax in the first year, and also claim the 45p a mile?
Seems it's also possible to offset the cost of getting a charger installed?
Thing is, my profit from the business is only around £10k a year.
I also pay income tax, deducted by the scheme administrators, on £12k a year company pensions.
Most of my personal allowance gets used by the state pension, around £11.5k.
Can I offset the cost of the car against my company pension income, or just the business income?
The car will cost way more than one year of income. Can I carry that forward as a "loss", and offset it for future years?
Presumably I would be liable for tax when the car gets sold?
Does this liability carry on forever, or is the a "write down" time limit?
What happens if I stop the self employment?
You are talking "Capital Allowances" - which are for offset against trading income and not offsetable against pension income or employment income.
I presume you are trading as a "sole trader" and not through a limited company?
If your business claims capital allowances (on any asset), when the asset is eventually sold, the business profit has to have the disposal proceeds of the asset disposal added to the taxable trading profit for the year.
I presume you are trading as a "sole trader" and not through a limited company?
If your business claims capital allowances (on any asset), when the asset is eventually sold, the business profit has to have the disposal proceeds of the asset disposal added to the taxable trading profit for the year.
Yes, sole trader.
So, if I paid £40k, 30:70 mileage split, I could offset £28k against business income?
But, my business income is only £12k.
Would the remaining £16k carry forward to year 2?
Then, £4k to year 3?
If I then decided to retire in year 4, I would liable to pay tax on 70% of the value at that point?
So, if I paid £40k, 30:70 mileage split, I could offset £28k against business income?
But, my business income is only £12k.
Would the remaining £16k carry forward to year 2?
Then, £4k to year 3?
If I then decided to retire in year 4, I would liable to pay tax on 70% of the value at that point?
All here -
https://www.gov.uk/capital-allowances/business-car...
What HMRC tends to giveth, HMRC also tends to taketh away. So, if a car (or other asset) qualifies for 100% allowances when purchased, they will claw back a chunk of that when the asset is eventually sold (or traded in)..
Be aware that even if a vehicle is elegible for generous capital allowances, these will be restricted if the vehicle is "dual use" i.e. part business/part private.
https://www.gov.uk/capital-allowances/business-car...
What HMRC tends to giveth, HMRC also tends to taketh away. So, if a car (or other asset) qualifies for 100% allowances when purchased, they will claw back a chunk of that when the asset is eventually sold (or traded in)..
Be aware that even if a vehicle is elegible for generous capital allowances, these will be restricted if the vehicle is "dual use" i.e. part business/part private.
Yes you can claim capital allowances on the business use element as you suggest. But.. you can't continue to claim the 45ppm. It's one or the other.
The 45ppm is the tax free mileage rate to cover all running costs of the vehicle.
If you purchase the EV and claim capital allowances (which makes sense) you would then have to put through the business element of your car insurance, vehicle repairs and your charging costs etc
If your capital allowances are in excess of your taxable profits for the year and you create a tax loss, you can either set this off against your other total income or carry it forward to use against your future business profits. You can't restrict the loss claim though, so if for example you had a £16k trading loss and you had £20k of other income, then your taxable income for the year would be £4k and you would be losing £8k of your tax free allowance. So depending on your other total income sometimes it makes sense to carry the losses forward.
The 45ppm is the tax free mileage rate to cover all running costs of the vehicle.
If you purchase the EV and claim capital allowances (which makes sense) you would then have to put through the business element of your car insurance, vehicle repairs and your charging costs etc
If your capital allowances are in excess of your taxable profits for the year and you create a tax loss, you can either set this off against your other total income or carry it forward to use against your future business profits. You can't restrict the loss claim though, so if for example you had a £16k trading loss and you had £20k of other income, then your taxable income for the year would be £4k and you would be losing £8k of your tax free allowance. So depending on your other total income sometimes it makes sense to carry the losses forward.
I've read through those HMRC pages previously, but I've just read them again.
I could claim the business miles proportion of the purchase price in the first year, and carry forward any unused part to subsequent years.
I would have to pay tax on the value upon disposal.
It's unclear to me whether this is actual value (sale price) received when selling, or the notional value after the normal write down allowance (18% on a new EV)?
So, it appears that all I'm really getting is tax relief on the depreciation during my ownership, proportional to business use?
The only "advantage" of going for a new EV is it helps cash flow by being 100% up front in the first year - assuming the business makes enough profit. Any other type of car, you have to spread it out over a much longer period.
This is how I thought it worked, and why I've always just opted for the 45p a mile.
I was reading some "advice" on another website that said self employed could claim 100% in the first year, PLUS also claiming the 45p.
Seems that isn't the case, it's one or the other - simple 45p a mile, or 100% write down and actual running costs.
Looks like I'll be much better of buying a lightly-used EV for £10k+ off list price, and just claiming the 45p a mile flat rate against profits.
The tax saving on a new £40k EV would be £8k, but I'd have to pay £4k of it back if I sold it "half price" in 3 or 4 years.
The 45p a mile is probably better than claiming the actual electricity, insurance and maintenance costs too.
No tax bill to pay when I retire either
I could claim the business miles proportion of the purchase price in the first year, and carry forward any unused part to subsequent years.
I would have to pay tax on the value upon disposal.
It's unclear to me whether this is actual value (sale price) received when selling, or the notional value after the normal write down allowance (18% on a new EV)?
So, it appears that all I'm really getting is tax relief on the depreciation during my ownership, proportional to business use?
The only "advantage" of going for a new EV is it helps cash flow by being 100% up front in the first year - assuming the business makes enough profit. Any other type of car, you have to spread it out over a much longer period.
This is how I thought it worked, and why I've always just opted for the 45p a mile.
I was reading some "advice" on another website that said self employed could claim 100% in the first year, PLUS also claiming the 45p.
Seems that isn't the case, it's one or the other - simple 45p a mile, or 100% write down and actual running costs.
Looks like I'll be much better of buying a lightly-used EV for £10k+ off list price, and just claiming the 45p a mile flat rate against profits.
The tax saving on a new £40k EV would be £8k, but I'd have to pay £4k of it back if I sold it "half price" in 3 or 4 years.
The 45p a mile is probably better than claiming the actual electricity, insurance and maintenance costs too.
No tax bill to pay when I retire either
What happens in terms of calculating the assets value when they're disposed of as I'm guessing it can't always be a sale price? Is it some kind of notional value and if so how is it calculated?
A couple of real world examples; my neighbour retired and his company gifted him his 3 year old company car. After 3 years my work laptop is replaced and the old one is given to a charity. What would the company have to pay in those scenarios?
A couple of real world examples; my neighbour retired and his company gifted him his 3 year old company car. After 3 years my work laptop is replaced and the old one is given to a charity. What would the company have to pay in those scenarios?
SunsetZed said:
What happens in terms of calculating the assets value when they're disposed of as I'm guessing it can't always be a sale price? Is it some kind of notional value and if so how is it calculated?
A couple of real world examples; my neighbour retired and his company gifted him his 3 year old company car. After 3 years my work laptop is replaced and the old one is given to a charity. What would the company have to pay in those scenarios?
The "value" of an asset at the point it "leaves" the business can be a number of things - depending on the circumstances.A couple of real world examples; my neighbour retired and his company gifted him his 3 year old company car. After 3 years my work laptop is replaced and the old one is given to a charity. What would the company have to pay in those scenarios?
If the asset was sold, then the sale amount received is the value on disposal
If the asset was used as a trade-in on a new asset, then the trade-in amount received is the value
If the owner has just taken the asset out of the business (usually what happens when a sole trader ceases trading) then "market value" should be used.
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