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Where Taxpayers and Advisers Meet

Earning over 100k net - buy an expensive van to reduce tax?

ooadam
Posts:1
Joined:Thu Jan 12, 2017 11:08 pm
Earning over 100k net - buy an expensive van to reduce tax?

Postby ooadam » Thu Jan 12, 2017 11:20 pm

Hinew to teh forum!

So I am turning over 1mill and my last return was 80k net profit, it's going to be over 100k this time.

I am considering upgrading my transporter van (worth about 12k) and was looking at a newer used one. However for 30k I could get a top of the range new one. A hefty purchase but I may as well spend it right and give 6k less to the tax man if I have the money sitting there if it primarliy for business purposes (apparently)?


Thanks - Ad

Lambs
Posts:1611
Joined:Wed Aug 06, 2008 3:15 pm

Re: Earning over 100k net - buy an expensive van to reduce tax?

Postby Lambs » Fri Jan 13, 2017 1:39 am

O,

From a tax perspective, the purchase should be tax-efficient:

Cost of new van = £30k, trade-in of old £12k, net £18k. Eligible for immediate 100% tax relief in year/period of purchase. Should save £18,000 @ (40% Income Tax + 2% Class IV NIC) = £7,560

I am assuming you have not already breached the maximum annual spend for Annual Investment Allowance (£200k per annum, basically).

But you will have to adjust for any private use of the van - it restricts the amounts claimed, etc.

AT the end of the day, the more you spend, the more tax you will save. But I am guessing you would not spend £60,000 on a new van, to save £20k in tax.

In other words, you will save some tax, which is great, but it will probably cost you more in the real world - depreciation on trade-in, etc.

Regards,

Lambs

SteLacca
Posts:448
Joined:Fri Aug 07, 2015 2:17 pm

Re: Earning over 100k net - buy an expensive van to reduce tax?

Postby SteLacca » Fri Jan 20, 2017 5:17 pm

Just out of interest, are you working incorporated or unincorporated? (I ask because you've posted in the company taxation forum). Whilst Lambs advice stands regardless, if you are incorporated (and so the company is to buy the van) there are additional considerations such as benefit in kind. It's also worth noting that for an incorporated business exceeding £100,000 does not have the same adverse effects as it does unincorporated.

Lambs
Posts:1611
Joined:Wed Aug 06, 2008 3:15 pm

Re: Earning over 100k net - buy an expensive van to reduce tax?

Postby Lambs » Fri Jan 20, 2017 5:32 pm

Many thanks S for pointing that out. I must admit I didn't spot the particular forum in which it was posted.

Regards,

Lambs


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