April 29, 2017
If you’re planning to buy a new van, you should probably get a move on. Why? Because it could save you thousands of pounds in tax.
The end of the tax year is fast approaching, and if you haven’t used up your Annual Investment Allowance (AIA) then consider bringing that van purchase forward and saving yourself some money in the process.
Annual Investment Allowance is a method of claiming tax relief on many assets that your business may buy. It’s a kind of capital allowance. At present, the allowance limit is £200,000. If your purchase qualifies, you can deduct 100% of the cost of that asset from your business’s profit before you work out the tax that’s due on that profit.
As an example let’s say you buy a new van for your business, costing £10,000. Your business’s profits for the year come to £75,000. You can claim Annual Investment Allowance on the cost of the van, so you’d pay tax and national insurance on £65,000.
By acquiring a van on a hire purchase deal and subsequently signing the purchase contract and bringing the van into use within your business before the end of the tax year, you’re entitled to tax relief for the entire capital cost.
It’s important to remember that you can only claim the Annual Investment Allowance is the van is solely for business, and not personal use. In addition, all of the van’s running costs can also be offset against tax when it’s only used for business.
If your business is VAT registered, you claim the Annual Investment Allowance on the total cost of the van minus any VAT you can reclaim on it. If your business is not VAT registered then you claim the Annual Investment Allowance on the total cost of the van.
Don’t forget that by claiming 100% of the van’s cost against your tax, there are implications should you come to sell. If you sell your van in say, three years for £6,000 you would then have to pay the tax rate at the time on the £6,000 received for the van.
Thinking about a new van? Don’t miss out on the chance to save yourself some money and get it delivered for free, to your door! (UK Mainland) Call NOW 0845 021 0444 or enquire online and we’ll get back to you!