Where Taxpayers and Advisers Meet

Car depreciation and costs

Posts: 4
Joined: Wed Aug 06, 2008 3:59 pm

Postby binay75 » Sun Sep 23, 2007 11:46 am

Hi everyone - wondering if anyone can kindly advise me on the following -
I am self employed ( not VAT regd )and bought a second hand car ( C Class Merc ) worth 15000 GBP in September last year. I do about 15000 miles per annum with approx 50% as busines miles.
Prior to filing my returns I am wondering how much depreciation can I claim for . Also as I took a loan for the car can I on top of the depreciation / running costs / insurance etc claim for the interest on the loan.
Thnaks in advance

Posts: 6538
Joined: Wed Aug 06, 2008 3:22 pm

Postby King_Maker » Mon Sep 24, 2007 12:25 am

Assuming you have been in business for more than 12 months, you claim a WDA (Writing Down Allowance) of 25% p.a. - up to a maximum of £3000, as it considered an "expensive car", as it costs more than £12,000 (the actual depreciation would be given on disposal - either as a Balancing Allowance or Balancing Charge). This would be further restricted by 50% to reflect your private use; likewise the loan interest would be restricted by 50%.

As your turnover is below the VAT threshold, you can use the Inland Revenue's Approved Mileage Rates (40p per mile for the first 10,000 miles, and 25p thereafter) plus any finance interest instead of calculating the business % of all the relevant costs (including Capital Allowances).

Which is the better option will normally depend on the price of the car, its economy and reliability and the business miles travelled.

Have you read the Inland Revenue's Help Sheet IR222?

This gives guidance on calculating business profits, expenses, losses, accounting periods, Capital Alloances etc.

It is downloadable from their website.


Return to “Business Tax”