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Where Taxpayers and Advisers Meet

Can I claim capital allowance on used car

Sole trader
Posts:5
Joined:Wed Jan 13, 2021 9:23 pm
Can I claim capital allowance on used car

Postby Sole trader » Wed Jan 13, 2021 9:40 pm

Hello, I am sole trader buying and selling different type of goods, I am doing my tax return for year 2019-2020 I am confused if I am liable for capital Allowance for a car I bought for £5200 last year late April, it's a car not a van, 70% is used for business and 30% for private use, car reg is 2017 with emission is 103gr. Am I allowed to apply for capital allowance? your help is much appreciated Thank you

Lambs
Posts:1502
Joined:Wed Aug 06, 2008 3:15 pm

Re: Can I claim capital allowance on used car

Postby Lambs » Wed Jan 13, 2021 11:52 pm

S,

You CAN claim Capital Allowances on a used car. But not the 100% Annual Investment Allowance that you could claim for a van, laptop, office furniture or similar. Not because it's second-hand, but because it's a car. (There are special rules for cars with VERY low CO2 emissions but they do not apply to your car).

When you say "late April last year", do you mean April 2019 or April 2020? If you mean April 2019 - early in 2019/20, then you can claim in 2019/20 but if you bought in April 2020 then you will have to wait until your 2020/21 tax return to make a claim.

You can claim 18% as an allowance - this is the "main rate" for any item outside the scope of the Annual Investment Allowance - but you will still have to adjust for private use, so £5,200 x 18% = £936 but restrict by 30% for private use so relievable amount = £936 x 70% = £656 in the first year.

The remaining amount (£5,200 less £936 = £4,264 NOT £5,200 - £656 = £4,544) is carried forward so that you can claim 18% of £4,264 in your next year's calculation (subject to any restriction for private use in that later year, etc., etc.)

You do not have to claim the full amount if you don't need to (if you limit your claim now, then the amount carried forwards to be claimed in later years is increased accordingly). It does not matter at what point you bought the car in your accounting year, so long as you are in a standard full accounting year (not commencement, changing your year-end or similar).

You can also claim for fuel, repairs and similar - again, with a restriction for private use.

But you CANNOT claim the alternative mileage allowance on top of a Capital Allowances claim, because the higher initial mileage allowance rate includes a theoretical amount to cover the capital cost of running a car for business purposes.

With regards,

Lambs

Sole trader
Posts:5
Joined:Wed Jan 13, 2021 9:23 pm

Re: Can I claim capital allowance on used car

Postby Sole trader » Thu Jan 14, 2021 6:18 pm

Thank you very much for your prompt reply and clarification, my mistake I am a year behind I bought a car 2 years ago late 04/2019 not last year. I don't know if it's worth it to claim capital allowance for my car purchase as it might get complicated if I decide to sell it and buy another car. Thank you

Sole trader
Posts:5
Joined:Wed Jan 13, 2021 9:23 pm

Re: Can I claim capital allowance on used car

Postby Sole trader » Thu Jan 14, 2021 6:24 pm

Hello again, or is it better, easier to claim mileage allowance 45p per mile instead of capital allowance. I have used the car for business purpose I drove around 1500 miles. Thank you

Lambs
Posts:1502
Joined:Wed Aug 06, 2008 3:15 pm

Re: Can I claim capital allowance on used car

Postby Lambs » Mon Jan 18, 2021 5:05 pm

Difficult to say.

Remember that you can claim running costs AS WELL AS Capital Allowances, so the claim in your first year would seem to be better going down the Capital Allowances route. But the mileage allowance is certainly much simpler to claim and may start to look more attractive as you start to claim 18% of a progressively smaller amount.

Hope this helps.

With regards,

Lambs

Sole trader
Posts:5
Joined:Wed Jan 13, 2021 9:23 pm

Re: Can I claim capital allowance on used car

Postby Sole trader » Tue Jan 19, 2021 2:53 pm

Hell Lambs, thank you for your replies and help, I have last question ( I hope it's the last one), do I put the full price of the car cost which is £5200 in "Annual Investment Allowance (optional)" and it will deduct automatically 82% as it's a car and we are in-title 18% the value of the vehicle or do I type £936 in "Annual Investment Allowance: (optional)" tab. Thank you again

Lambs
Posts:1502
Joined:Wed Aug 06, 2008 3:15 pm

Re: Can I claim capital allowance on used car

Postby Lambs » Tue Jan 19, 2021 3:11 pm

S,

NO. As per original advice, you cannot access AIA with a car. You have to claim general Capital Allowances.

With regards,

Lambs

bd6759
Posts:3462
Joined:Sat Feb 01, 2014 3:26 pm

Re: Can I claim capital allowance on used car

Postby bd6759 » Tue Jan 19, 2021 5:38 pm

The amount is £656 per Lambs first answer, not £963. It goes in box 50.

Are you sure you only did 650 non-business miles?


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