Some (more) capable members will chip in but no, not quite.
Your expenses reduce your profits.
The taxman takes a share of that profit.
If you’re VAT registered, lease is usually a no brainer
Hi can anyone give me a bit of advice on leasing a van through my ltd company?
I have an accountant that is a family member but basically all she does is my books but offers little in the way of advice or much help really. I'm a carpenter so we exchange services when we can, she does my books and I do up her house.
My 11 year old transits at the stage that it's costing more to keep on the road than it would to lease a new one. So I've looked at vanarama and other lease options. I really don't understand tax jargon so would appreciate if it was simplified as best as possible.
I've spoke to a few people saying a "lease is tax deductible". Am I right in thinking that if I'm due say £10k to the tax man at the end of the year that the cost of the lease would come out of this as an expense? So 10k minus 2k lease would be 8k to the tax man?
Or is it only 20% of the 2k lease that I would get as relief?
Thanks in advance for any advice.
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Some (more) capable members will chip in but no, not quite.
Your expenses reduce your profits.
The taxman takes a share of that profit.
If you’re VAT registered, lease is usually a no brainer
'Against stupidity, the gods themselves struggle in vain' - Schiller.
The big benefit you might get is if you're VAT registered, but if not, we can ignore it.
At the end of a year of leasing, the total cost is added to the rest of your overheads, and comes off your income, giving you the profit, which is then taxable.
So, if your income is £50k, overheads are £10k, van is another £2k, your profit will be £38k, that attracts corporation tax, which is too complicated to go into here, but does that make it any clearer?
It’s worth noting that PCH and PCP are treated differently from an accounting point of view so make sure you a taking out the hire/lease agreement that suits you.
If there is an option to buy at the end of the lease term the van will be a capital allowance (depending on the contract). If there is no option to buy it will be a monthly expense.
This is how it was explained to me by my accountant anyway.
Last edited by benny.c; 17th August 2018 at 14:57.
The tax treatment depends on whether it’s an agreement to buy or just a rental agreement.
For a rental agreement the whole amount can be deducted against income (if you’re not vat registered, then it’s the full amount including vat).
If it’s a HP or other variant of an agreement which ends up purchasing the vehicle, then only the interest element can be deducted against profit annually. However, you might well be able to deduct the full value of the van against tax in year 1 under the annual investment allowance. (Regardless of whether or not you’ve actually paid for it yet). Note that if claiming the whole value takes your taxable income below your personal allowance value, you can restrict the claim in year 1 to only reduce it to the value of your PA, leaving the balance to claim in future years.
If you restrict the claim, the balance will be given as a % writing down allowance annually.
Only lease one if your gonna treat it with kid gloves,when it’s time to go back they will do you dry.
Just buy one ,I’m exactly in the same position as you .
With the low interest rates you can get something decent and probably pay less a month
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I'm not currently vat registered as most of my work is contracting to a larger company that provides all the material.
I think it may be best to change to a different accountant that can look at my situation and decide what's best.
Thanks for the advice.
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Thanks for all the advice guys, much appreciated.
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My advice get the best accountant that you can afford forget family or friends