Expenses. Spreading the load

[inthewoods]

Allowances start from purchase date not payment date. Spreading the tax relief over the 3 years is completely legal.

[kevinjohnsonmbe]

Gettin an accountant is definately a good shout. To clarify the van was bought and paid for last june.

 

 

 

I will look up capital gains thanks,

 

 

 

I did think it sounded a but dodgy, hence the post.

 

 

 

As to the weather, its rainin'. Ta for askin'

 

 

Drop "capital gain", that's an ENTIRELY different subject and not what you seem to be asking about.

 

It's "capital allowance" under annual investment allowance.

 

You can write it all down in one hit against the taxable income of the year of purchase, or, write it down in percentages over consecutive years.

 

It's not dodgy at all, it's an allowable deduction.

 

Example:

 

If you earned 100k and bought a van for 20k, your taxable income would be 80k if you wrote it down in the year of purchase.

Edited March 31, 2017 by kevinjohnsonmbe

[billpierce]

Drop "capital gain", that's an ENTIRELY different subject and not what you seem to be asking about.

 

It's "capital allowance" under annual investment allowance.

 

You can write it all down in one hit against the taxable income of the year of purchase, or, write it down in percentages over consecutive years.

 

It's not dodgy at all, it's an allowable deduction.

 

Example:

 

If you earned 100k and bought a van for 20k, your taxable income would be 80k if you wrote it down in the year of purchase.

Yep, allowance it is, sorry

 

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[waterbuoy]

The nature of the item means it has to be depreciated in different ways so be careful.

 

'Tech' such as computers etc can be written down in a single year, ie buy a PC for £500, capital allowance is £500. This is because such items quickly become outdated.

 

Larger items such as vehicles and plant (new or second hand) are usually written down over a number of years.

 

For example, you might 'write down' a van which cost you £8000 at 25% a year. This means that for year 1 you can claim £2000 (ie 25% of £8000) as capital allowances, but will still have an asset with a 'book value' of £6k.

 

In year 2 the 'write down' is £1,500 (ie 25% of £6,000), allowing you to claim £1,500 in capital allowances and leaving you with an asset that is now wiorth £4,500.

 

Yr 3 the write down is £1,125 giving Capital Allowance of £1,125 and a book value of £3,375 etc.

 

The aim is to try and ensure that when you come to dispose/sell the asset it has a similar book value to that which you can reasonably expect to achieve. In the above example, should you sell the van for say £3,000 at the end of year 3 then you have an additional £375 that can be used as capital allowances. However, if you sell it for more than the 'book value' of £3,375 then you will have to pay tax on the difference (or claim a smaller capital allowance depending on the timing)

 

This system is designed to allow a business to write down a number of assets (which may have been purchased in different years) at the same time. The 'book values' might be included on your balance sheet if that is prepared for your business - not a legal requirement for a sole trader, but useful if you are trying to raise capital from a bank etc.

[Stoke Wood Project]

Spot on there. Waterbouy

 

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[Thesnarlingbadger]

Yeah spread the cost over a couple of years on the bigger items. But you want to essentially be earning 11k ish for the first year so you use up your tax free earnings. Then keeping what expenses you can to carry over to keep next years tax down as much as possible.

Hope this makes sense.

 

 

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[joebepi]

Thanks everyone for taking the time to reply on this, perhaps not the most interesting thread on arbtalk.

 

I'll do my research but this all makes a lot more sense than just my mates saying it'll be fine. I'm happy to pay the tax i'm due but don't wanna get shafted just for the sake of it... Maybe an accountant is the way to go....

 

Thanks again!

[Steve Bullman]

An accountant is always the way to go!

 

 

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[nepia]

joebepi, to give you an idea of cost an accountant is probably going to be a few hundreds of pounds; certainly not thousands.

The savings will be more.

[joebepi]

Cheers, wise words.