AiA on a van purchase

[andye]

Hi I am a sole trader not VAT registered and wish to purchase a van outright no lease no hire no hp so my tax bill is about £2.500.00p a year and I want to purchase a van for say £8000 so my question is do I enter £8000 on my tax return in the AIA box or would I claim £2000 for the next 4 years

thanks in advance for your help

[pawncob]

It's your choice. You can't claim it after the first year, except as a writing down allowance at 18%.

https://www.gov.uk/work-out-capital-all ... -and-pools

[bd6759]

Unless you are using the cash basis, in which case you just include it as an expense.

[jpcentral]

You definitely can't claim £2,000 per annum for four years. As Pawncob says, the (current) permitted rate is 18% on the reducing balance - £1,440 year 1, £1181 year 2, 968 year 3 etc.

The question becomes whether it is better to use the full £8,000 to reduce your taxable profits this year under the AIA regulations or whether it is better to take the benefit over a number of years? The answer will depend on individual circumstance. On the face of it, if your tax bill is £2,500, using AIA would reduce this by £2,000 but what isn't clear is whether the tax figure quoted is actually for tax or tax plus Class 4 and whether or not it includes payments on account or if it is after previous payments in account have been taken into consideration.

There is actually a third option, namely not taking any WDA but deferring it to a subsequent year.

There is also a call to be made about whether it may be beneficial to have the WDA in subsequent years. This may be relevant if there is a possibility that you could be a higher rate taxpayer in one of the next couple of years.

We would normally have the basic figures in front of us plus an estimate for the next year before giving the client options.

[andye]

Thanks guys just looking to see what my options are and yes £2500 includes my class 4 many apologies for omitting this