Tax Return for Self-employed

You haven't given enough information.

You need to give the full profit and loss account.

Hmmm...that's interesting. I've just resolved the matter with the assistance of a very helpful technician at HMRC and they were able to work with the information I posted here.

There can be a huge difference between what is permissable - what is desirable - and what is the most tax efficient .... ;-)

They were helpful at getting you to pay more tax than necessary!

Go ahead and claim the maximum capital allowances even if it doesn't save you tax and only wastes the chance of saving tax in the future.

But then you are trying to do your tax yourself without knowing enough about tax. Save a little on accountancy and lose a lot in tax is a false economy.

Don't always trust what the guy on the phone at HMRC says.

Did they say:

Car: 449 Pool: 1,400

Whether you want to claim the maximum allowances is another matter and depends on your circumstances, e.g. your marginal tax and NIC rates in the years concerned.

Agreed - although taken over the ensuing 2 or 3 years, the OP would prob be better off just to claim 40p - unless doing very low or very high mileage, or has an expensive-to-run car.

Disagree... I don't think you've included the pre-owned £500 kit introduced into the business

Strongly agree...

Why would they have said that? The raw figures the OP gave were that he introduced a £6000 car into the business and that it received 70% business use. Therefore the maximum WDA for year 1 would be 25% of £6000, leaving a pool value of 75%, i.e. £1500 and £4500 respectively. Of the £1500 WDA, 70% would be settable against profits.

In addition, he could claim (and set 100% of) 25% WDA on the £4000 computing stuff.

Thus max year 1 business WDA would be £2050.

If there is no prospect of him becoming a HRTP anytime soon, it would be worth claiming the WDAs only to the extent that his profits lie in the basic rate band, i.e. are well above £7k (together with any other income he may have - such as from employment between 6 April and 31 Oct, given that he "went" self-employed on 1 Nov -- but he doesn't say anything about whether there has been employment or whether it is/was continuing).

It may have been (or indeed it may still be -- there is still time to change his mind about this, even if it's less than a week) better not to (have) introduce(d) the car into the business but to keep it private and to charge 40p per business mile as expenses, or 25p after the first

No way. I think Jon may have read the OP as 70% private use where in fact he said 70% business use. And if he had said

Agree about "if very low mileage", but why also "if very high"? Surely even 25p per mile is bound to exceed running costs and depreciation, bearing in mind the first 10k miles will already have bagged £4000, which on a (typical?) running cost of (say)

I think it goes without saying that Jon is concentrating on the car. Cars have their own pools, don't they, and other stuff goes in a different general pool.

In any event, though, is it not usual practice to work out WDA and WDV on full value at introduction, and only to scale down WDA by the business use ratio, leaving the pool value unscaled? After all, what if the business use ratio changes in subsequent years? So car pool would stand at £4500.

WDA Car = 6000 x 25% x 70% x 156 / 365 (days) = £449 (rounded)

No - if he disclaims FYA, then 4,000 @ 25% x 156 / 365 (days)

But if he claims FYA, then apportionment for short period doesn't apply, hence..

(this assumes FYA not claimed on the £500 2nd-hand kit in a former life)

Incidentally, assets with private use (car in thsi case) is not pooled.

See other post

The point is that it's not wise just to make assumptions. Certainly not when the client is paying to get it right.

Thus, although not "average", the figures could well be...

Total 36,000 mpa Fuel 20p / mile = £7,200 pa Maint (3 x 12k services) £1,500 pa Tyres (say 1.5 sets at £180 per tyre) £1,080 pa Ins & VED £700 pa WDA £1,500 pa (initially) Total cost = £ 11,980 pa x 70% = £8,386

cf... 10k @ 40p + 15,200 @ 25p = £7,800

You may claim these figures aren't common, but I have enough clients running fuel guzzling, heavy, fast cars to know it really does happen in practice.

Although WDA will reduce each year, at that mileage, car will prob lose all its value in 3 or so years. So at disposal, BA ( x 70% ) can be claimed.

Only if "expensive" or have private use.

No!

Just to clarify my calcs: -

Car is: -

Don't forget that we have a short period of account, hence 156 days.

The car is not pooled as there is private use.

Pool is: -

Sorry - didn't see that there were 2 x "computer hardware 500" - read the post too quickly. (oops!)

This bit should be subject to short period reduction too, though, shouldn't it? And hasn't the 40% FYA for IT scheme expired?

This must be Troy's friend the doctor with his fleet of Rolls Royces and XJ12s. I get 8p a mile from my by no means frugal 2l Diesel.

Jolly expensive services. I raise an eyebrow when mine's over £200. But for an XJ12, fair enough.

Reality check. A £6000 XJ12?

Fair enough, but even your inflated running costs have managed to beat the mileage payments by only the narrowest of margins.

This is what HMRC told me, except that the Pool was also subject to the

FYA now 40% for (almost) all stuff for SMEs. Not just ICT.

And no apportionment for FYAs (see my earlier post)

The 100% FYA for ICT expenditure has indeed expired. You instead (in most cases) just get the 40% as you would for plant generally.

FYA's are not usually apportioned for short periods of account.

Wow - what about on the flat, and have you tried going up hills...?

I get 16p to 17p - but obv that's petrol.

Mine is coming up and will be the wrong side of £500 with no extras. That's for a large-ish "quality / exec" (not my description...) car - franchised dealer charges £80 + vat per hour. Interestingly, the rate drops for "older" cars - apparently to attract the non-"company car" business.

What - for a heavy-ish (presumably) diesel? Where do you get them, and do they last 24k? I couldn't shoe a mini for that.

Are you questioning Ins ? Are you assuming max NCD, owner-only dirver, SD+P use only?

I accept that. Which is why I said originally "... although taken over the ensuing 2 or 3 years, the OP would prob be better off just to claim 40p - unless doing very low or very high mileage, or has an expensive-to-run car".

Full marks for getting HMRC's help so quickly with your original question. But sounds like they were either ill-informed or were trying to rip you off... :-(

From the horses mouth.....