Tax questions

[Donnie]

Hey I've been self employed 7 months and have got a few questions I'd like to ask about tax. I've got an accountant to do it officially but wanting to know what I can get away with putting down on my tax deductible expenses. 
 

I've a little Kangoo van I bought earlier this year for 4000 which I want to put it down on my tax bill. 
 

Also have a MG ZS that I'd like to put down as well as the payments are 200 a month and I use that for getting about in as well as family. (not sure if you can fully put cars down) would be good to know if anyone else does this?

 

if I can't put the cars payments down fully I was looking at getting a pick up next year as a family motor/work motor. And still use my van as well, or is there limits to this? 
 

Can I also put my full mobile phone bill down as it is 50 a month for my phone?

[waterbuoy]

Easy bit - Anything which you can justify for business use can be set against the business - ie mobile, but don't take the proverbial!

 

Vehicles are much more difficult to address and there are a number of options.

 

First is based on all costs going through the business:

I put all my running costs through the business, and then apportion a % out for personal use. 

So far as the capital is concerned then you can depreciate this over time, and set that against the earnings.

If paying for an item on HP then ALL of the interest can be set against the business, but not the capital element of the repayment.

 

The second approach is where you cover all the costs yourself but then 'charge' the business an amount per mile which is deducted from your tax liability.  HMRC set the amount that can be charged (or claimed) 'tax free' - I think it is around 45p per mile for the first 10k, then 25p per mile after that.  (ie 15k miles a year would allow you to offset (0.45x10,000) + (0.25x5,000) = £5,750

 

Which route you go down is very much a personal choice.  If you have a cheap to run vehicle then the second option might be sensible.  However, if it is a thirsty gas-guzzler which is expensive to service then option 1 might make more sense.

 

You really need to get this right from the outset and speak with your accountant to see what is most appropriate for your circumstances.

 

Edit - the other consideration, and a further reason to speak with your accountant, is whether or not you should become VAT registered.  That is a separate question alltogether!

 

Edited March 13, 2023 by waterbuoy

[Squaredy]

4 hours ago, JDon said:

Hey I've been self employed 7 months and have got a few questions I'd like to ask about tax. I've got an accountant to do it officially but wanting to know what I can get away with putting down on my tax deductible expenses. 
 

I've a little Kangoo van I bought earlier this year for 4000 which I want to put it down on my tax bill. 
 

Also have a MG ZS that I'd like to put down as well as the payments are 200 a month and I use that for getting about in as well as family. (not sure if you can fully put cars down) would be good to know if anyone else does this?

 

if I can't put the cars payments down fully I was looking at getting a pick up next year as a family motor/work motor. And still use my van as well, or is there limits to this? 
 

Can I also put my full mobile phone bill down as it is 50 a month for my phone?

As you can see from the good answer above this is quite complicated.  This is what you pay the accountant for and he or she is the expert (or should be).  Cars are especially complicated.

Edited March 13, 2023 by Squaredy

[Jackalope]

I use the mileage method for my accounts. I only have one vehicle and keeping track of the percentage of work Vs personal use was more hassle than I could be bothered with. 

 

I just make a note at the end of each day of the miles to & from site and add that up each month. Multiply by 0.45 and that gives me a cash figure to add to other work expenses that month. 

 

Sounds like that would suit your MG at least if it's also the family car. 

[jfc]

I bought Understand Tax for Small Business by Sarah deeks,best £10 I've spent on a work book. Saved me loads and kept me right, covers all the questions you've asked. Buy the most up to date copy.

Edited March 13, 2023 by jfc

[SteamedTomatoes]

You can get away with putting anything through...  Unless you get caught!

If that worries you, best to only put through anything and any portion of anything that you use for your business.  As I understand, this cannot include any clothing like t-shirts you use for work, though you could put your chainsaw trousers and boots through, just as an example of something where it doesn't always make sense.  (This is from my own research and is not professional advice)

You might be able to put the van in an asset pool and then put down 18% of the remaining of that 4k each year.  You will need to research this yourself since for different vehicles the rules are different.  This is just how I work it for my Iveco.

Best to research each item individually and/or get professional advice.

Or blag it until you're turning over enough that they might look into you, at your own peril!

Once again, I am not a professional money man so be very cautious following anything I've said.

[maybelateron]

3 minutes ago, SteamedTomatoes said:

As I understand, this cannot include any clothing like t-shirts you use for work,

I always err on the side of caution, and never push the boundaries at all, but I did check with my accountant about clothing that is not PPE. If it is embroidered with you business name on it you can put it through the books they said. However, that is no longer relevant to me as we just use standard Hi Viz tops now with no embroidery, but this is then classed as PPE. 

[Dan Maynard]

3 hours ago, Jackalope said:

keeping track of the percentage of work Vs personal use was more hassle than I could be bothered with

This would drive me nuts as well, it's the great thing about a van just for work, direct expense all costs and no need to keep track of mileage.

[Donnie]

On 13/03/2023 at 15:09, waterbuoy said:

Easy bit - Anything which you can justify for business use can be set against the business - ie mobile, but don't take the proverbial!

 

Vehicles are much more difficult to address and there are a number of options.

 

First is based on all costs going through the business:

I put all my running costs through the business, and then apportion a % out for personal use. 

So far as the capital is concerned then you can depreciate this over time, and set that against the earnings.

If paying for an item on HP then ALL of the interest can be set against the business, but not the capital element of the repayment.

 

The second approach is where you cover all the costs yourself but then 'charge' the business an amount per mile which is deducted from your tax liability.  HMRC set the amount that can be charged (or claimed) 'tax free' - I think it is around 45p per mile for the first 10k, then 25p per mile after that.  (ie 15k miles a year would allow you to offset (0.45x10,000) + (0.25x5,000) = £5,750

 

Which route you go down is very much a personal choice.  If you have a cheap to run vehicle then the second option might be sensible.  However, if it is a thirsty gas-guzzler which is expensive to service then option 1 might make more sense.

 

You really need to get this right from the outset and speak with your accountant to see what is most appropriate for your circumstances.

 

Edit - the other consideration, and a further reason to speak with your accountant, is whether or not you should become VAT registered.  That is a separate question alltogether!

 

 

 

you said: If paying for an item on HP then ALL of the interest can be set against the business, but not the capital element of the repayment.

 

 

Do you mean if I paid say 300 a month for a pick up, only the interest of that 300 would be tax deductable? 
 

For example if it was 10 percent interest, would only 30 a month be tax deductible? 
 

i will be getting an accountant to do it all for me and clearing it with mine after April is done. Just like to have some sort of knowledge beforehand haha

[waterbuoy]

Basically yes, although the interest element may alter during the term of the loan.  The remainder of the payment reflects the capital, for which the total amount is depreciated on an annual basis.

 

For example, if you are buying a £4,000 van at £300 a month, of which (to simplify) £30 a month is interest then:

 

The £30 a month interest can be offset against earnings

The £4,000 is depreciated as a capital asset and the depreciation is then offset against earnings