self employed / inland revenue / car
Discussion
My wife has just qualified as a dental hygienist,she will be self employed full time in 3 different practices from tommorow ( yay ! ).
She has to pay own tax/insurance etc,so how does it work claiming money back for buying a car for use travelling to and from work... ? , can it be done in this situation ?,I haven't a clue about these things
If she pays say 500 quid a month tax,what percentage of the car can be claimed back etc ?
Help !!
any more info needed i will put up..
BTW , she does have an appointment with an accountant soon,would just like to know some things before going in !!
Thanks ...
She has to pay own tax/insurance etc,so how does it work claiming money back for buying a car for use travelling to and from work... ? , can it be done in this situation ?,I haven't a clue about these things
If she pays say 500 quid a month tax,what percentage of the car can be claimed back etc ?
Help !!
any more info needed i will put up..
BTW , she does have an appointment with an accountant soon,would just like to know some things before going in !!
Thanks ...
Most people who are self employed have more than one customer so business trips involve travelling to and from these different customers. The costs incurred on these trips are wholly and exclusively for the purpose of the "trade" and are therefore fully claimable as expenditure against the business income. Problems can arise when a self employed individual has only one customer. In these circumstances the Inland Revenue could question whether the individual is really properly self employed. However, on the assumption that your wife is legitimately self employed she should have no trouble claiming these costs. Her business address is probably the home adress so travel from her business address to her customers (wherever they are) is legitimate business travel. In fact, travel for ANY business purpose (eg. meeting the bank manager, a trip to the shops to buy supplies, travel and accomodation for a conference etc) is also fully allowable.
Regarding the actual claim, there are two ways of going about this. The simplest way is to do it on a pence per mile basis. In other words, the business does not need to record ANY expenditure involved in running the car (petrol, insurance, road fund licence, MOT, capital cost) but instead a deduction is made in the business accounts based on the actual business miles travelled multiplied by the Inland Rebvenue's mileage claim rates (40p per mile for the first 10,000 business miles, 25p per mile thereafter). This is the simplest way of doing it and it suits smaller businesses better.
The alternative way is to record ALL motoring costs in full, including the full cost of the vehicle. These costs (not the cost of the vehicle itself) are then deducted against the business income but are then "restricted" by a "Personal Use" adjustment to take into account the fact that the vehicle is probably used for both business and private purposes. The Private Use adjustment is based on the business miles in the year expressed as a fraction of the total miles. The Inland Revenue can question how the business/private split has been arrived at so, again, decent mileage records ashould be kept and should be reviewed on an annual basis.
In addition to the normal day to day running costs of the vehile, the original capital cost of the car can be claimed in the form of Capital Allowances. This is usually at 25% of the cost (or initial value) of the car on a reducing balance method. This claim will also be restricted by the private use adjustment.
Finally, finance costs of the vehicle can also be claimed, suitably reduced ny the private use adjustment.
I hope you find the above useful.
Regarding the actual claim, there are two ways of going about this. The simplest way is to do it on a pence per mile basis. In other words, the business does not need to record ANY expenditure involved in running the car (petrol, insurance, road fund licence, MOT, capital cost) but instead a deduction is made in the business accounts based on the actual business miles travelled multiplied by the Inland Rebvenue's mileage claim rates (40p per mile for the first 10,000 business miles, 25p per mile thereafter). This is the simplest way of doing it and it suits smaller businesses better.
The alternative way is to record ALL motoring costs in full, including the full cost of the vehicle. These costs (not the cost of the vehicle itself) are then deducted against the business income but are then "restricted" by a "Personal Use" adjustment to take into account the fact that the vehicle is probably used for both business and private purposes. The Private Use adjustment is based on the business miles in the year expressed as a fraction of the total miles. The Inland Revenue can question how the business/private split has been arrived at so, again, decent mileage records ashould be kept and should be reviewed on an annual basis.
In addition to the normal day to day running costs of the vehile, the original capital cost of the car can be claimed in the form of Capital Allowances. This is usually at 25% of the cost (or initial value) of the car on a reducing balance method. This claim will also be restricted by the private use adjustment.
Finally, finance costs of the vehicle can also be claimed, suitably reduced ny the private use adjustment.
I hope you find the above useful.
I'm not sure of the exact details (they keep changing) but if you try to claim the car as a "company" car bought or leased by the business then you will stiched up heavily on tax (something like being taxed on 30% of the value of the car per year - IE a 30K car, you pay 22% tax on 10K or £2,200 per year extra tax at basic rate). If you claim mileage expenses then that is not taxeable as long as you use the correct rates.
My accountant has always maintained that it is more cost effective for me to run my car(s) as private cars and charge mileage to the company.
The alternative of running your car as a company car has too many pitfalls, the most notable being the benefit in kind of private mileage - ie. getting stung for loads of tax like regular employees with company cars.
In short, unless you are doing BIG business miles it is preferable to run a private car and claim a mileage allowance off the business.
Don't forget that you'll need to get a minimum of Class 1 Business Use on the insurance policy of the car(s) to be used for business miles. The extra is quite nominal I've found - I even have Class 1 on my TVR policy, which is nice.
The alternative of running your car as a company car has too many pitfalls, the most notable being the benefit in kind of private mileage - ie. getting stung for loads of tax like regular employees with company cars.
In short, unless you are doing BIG business miles it is preferable to run a private car and claim a mileage allowance off the business.
Don't forget that you'll need to get a minimum of Class 1 Business Use on the insurance policy of the car(s) to be used for business miles. The extra is quite nominal I've found - I even have Class 1 on my TVR policy, which is nice.
Ignore ALL the references here to Company Cars and Benefits in Kind (BIK). Company Car and BIK regulations DO NOT apply to those who are Self Employed.
Be careful of ANY advice you get on these types of threads as there is a danger that you may pick up totally incorrect information.
By the way, I am a Chartered Certified Accountant so I have more knowledge about these matters than others.
Be careful of ANY advice you get on these types of threads as there is a danger that you may pick up totally incorrect information.
By the way, I am a Chartered Certified Accountant so I have more knowledge about these matters than others.
eric mc said:Sorry, I should have added to my post that I am not an accountant and my opinion was only my understanding as a layman and based on what I have been told.
Be careful of ANY advice you get on these types of threads as there is a danger that you may pick up totally incorrect information.
But at the end of the day, one would be a fool to take as gospel the advice given on a motoring forum anyway. This is PistonHeads.com and not AccountancyAdvice.com after all!
If the original poster wants a definitive answer they should indeed consult a qualified accountant.
>> Edited by JonRB on Thursday 3rd July 16:45
There is a clear legal and tax distinction between "Self Employed" and a Limited Company. If you run a business through a limnited company, then you, as a person, are emphatically NOT self employed. You are "merely" an officer (and presumably a shareholder) of your own company. It is the company that is doing the trading, not you.
A true self employed individual is a person trading in their own right (not through a limited company) and, as I said, BIK rules DO NOT apply to someone trading in this manner.
A true self employed individual is a person trading in their own right (not through a limited company) and, as I said, BIK rules DO NOT apply to someone trading in this manner.
eric mc said:You're quite right, of course, Eric. However there are quite a few IT Contractors on PistonHeads and we get called / treated as Self Employed so often that it is dangerously easy to get all mixed up over it.
A true self employed individual is a person trading in their own right (not through a limited company) and, as I said, BIK rules DO NOT apply to someone trading in this manner.
If you read a lot of the comments on this thread in the light of people who run Ltd PSCs then the advice, although obviously misguided, makes more sense.
Note: I'm not disputing you at all. I'm just pointing out where the misunderstanding may have come from.
No probs - but I thought Wayne UK's missus should get the correct facts at the start. Incidentally, I have looked after a few dental hygienists' tax affairs and they normally do operate as true "self employed" individuals ie. as sole traders.
>> Edited by eric mc on Thursday 3rd July 17:56
>> Edited by eric mc on Thursday 3rd July 17:56
eric mc said:
Wayne - you have mail. If it has not got through to you, call me on 01252-653383. I'm in tomorrow morning but will be leaving for LLandow in the early afternoon.(I've a track day and sprint event booked this weekend)
Well bugger me ....... An accountant who know's how to have fun
Go Eric Go ......I may need to contact you when we are in need of accountant type services!
Paul
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