Equipment Depreciation Question

[niftysteve]

BTW, thats why its actually best to buy chippers on the monthly rather than paying in full up front.

 

If you pay £13K+ in one go for a chipper you will only get about 5k tax relief that year. might as well keep the 13K in the bank.

 

thats pretty much what my accountant says keep the money in your bank just incase its needed

[Cosmiccrofter]

There's some confusion here regarding depreciation and capital allowances. Depreciation is just a book entry to write down the value of the assets over their expected useful life in your accounts. These are usually calculated at 15/20% reducing balance on plant and 25% on vehicles.

 

Depreciation is added back to your profit to calculate your taxable profit, and you then reduce it by claiming capital allowances on plant/commercial vehicles etc, which at present comprises the Annual Investment Allowance (100% up to a maximum of £25,000 in 2012/13), and a writing down allowance on the balance of 18%.

 

It doesn't matter whether the asset is bought on credit or not, the full AIA is claimed. For example, a new van costing £20,000 bought on HP with a desposit of £5,000 would still be available for the 100% AIA of £20,000 in the year it is bought. Obviously there are no further allowances claimable on the van in subsequent years as it's tax written down value is zero. To claim the 100% AIA, it doesn't matter if it is one item or several.

 

You cannot claim capital allowances on leased assets however.