Optician needs advice on self-employed tax position and business cars
I’M a self employed optician and I work between two practices so I clock up around 900 miles a month for work and probably 25-50 miles for personal use if that.
Most of my driving is town driving (not in central London) and about 100 is motorway. My current car was purchased outright eight years ago and needs replacing.
I’m looking at the new Volkswagen Golf . I don’t mind a brand new car or a car that’s one-two years’ old – my decision will be influenced by the most tax efficient option! Budget is around £20k.
I’m unsure how the tax rules apply to me so I don’t know what I can claim and what I can’t?
Any help in this matter would be greatly appreciated. I’m not VAT registered and currently do my own tax returns.
Paul Bulloch, managing director of Concept Vehicle Leasing, is our expert on self-employed and business company car tax.
As self-employed, you can claim 100% of all your motoring expenses with a restriction of 20% for the private mileage element – HMRC won’t accept much less than that unless you can prove categorically your business versus private mileage with detailed daily logs.
For more information on the most tax-efficient way to run a business car
- Click here to read this helpful article on Capital Allowances
As for the capital allowances on your purchase, there are three main bands ranging from 100% First Year Allowance to just 8%.
With this in mind, it would be more tax efficient to choose the current VW Golf GTE Plug-in hybrid (CO2 emissions of 39g/km), because cars with CO2 emissions up to 75g/km qualify for 100% capital allowances in the first year – again with the 20% restriction for the private mileage element.
However, there are a few ifs.
The plug-in hybrid option is pricey at more than £30,000 – which is some way north of your budget – and on the updated 2017 model year Golf there is currently no plug-in option available – at least yet.
If you were to choose the 2017 model year VW Golf 1.0 TSI SE Navigation 110PS five-door (CO2 emissions of 109g/km) – we’ve chosen the petrol model for you as the majority of your motoring is in town – then the capital allowances would be 18% per annum (minus 20% private mileage restriction) on a reducing balance basis.
This new model Golf is within your budget, too, at £20,120 on the road.
Financing your new car tax-efficiently
In terms of finance, you could choose HP or Car lease purchase and claim the interest element as a taxable expense (again with the private restriction), because as an optician you won’t be VAT-registered.
Have you thought of car leasing?
However, should you prefer to lease your car, say through a personal contract hire lease, then the entire rentals would be allowable as a taxable expense (minus private element).
However, if you were lease your car like this, you would not then be able to claim capital allowances.
We would advise you to take professional car advice either through a car dealer or through a BVRLA-approved car leasing broker, as well as taxation advice from an accountant.
They will be able to provide a comparison on what is the most tax-efficient way to run a business car for your particular circumstances.