Business accounts...advice please

[mgnelec09]

I am a small electrical business and been trading just over 18 months.

I try to keep my invoices, bank statements, etc intact and in order but what I dont really understand is how people put new vans, etc through the business.

Am I right in saying that for example if you earn £35k gross profit and get taxed on that say 15% which equals £29kish

If you buy a van for £4K do you only have to pay £2k tax? Or if you buy a dearer van say £8k, will the taxman owe you £2k?

Everyone I speak to has a different opinion and my accountant doesnt make it much clearer.

Sorry if this sounds a bit naive but Ive only put forward one set of accounts in my life so far and still non the wiser although i nod my head and pretend I know what im talking about

 

[telectrix]

van is classed as capital expenditure. say you buy a 2nd hand van at £4000. you write off 25% in the first year ( £1000) then 25% in the 2nd ( £750) and so on . after 4 years it's classed as scrap.

 

[sjm]

I believe that you can write the whole expenditure off against tax in one year now. No more messing about with writing down allowance etc. Phone the tax helpline and ask, they're quite helpful really.

 

[Dunc]

Think the rules have changed recently. Used to be 50% first year then 25% for second and third. Now you can choose to write it all off in one year. As a rule of thumb with tax you work it out as follows:

Turn over (what you charge your customers including all labour/materials etc) - Materials and all other business overheads (insurances, trade associations, work wear, fuel, vehicle, MOT, service, stationary and so on) = Gross profit

You then subtract your annual taxable allowance (your tax code) from your Gross Profit and that will give you a figure that the government will tax you on at a rate of 20% up to a certain threshold.

 

[VoltzElectrical]

claim mileage rather than expenses on the van. 40p per mile first 10,000 then 25p. Capital expenditure up to...lots! now written off in first year. You won't pay tax on that amount. If you have, then you'll get it back after adjustments for class 4 NI.

 

[miner69er]

best thing to do is get yourself an accountant. they don't cost that much, i'm a limited company and my accountant charges £335-00 per year to do all my returns including corperation tax. My better half does keep the books in order day to day so all the accountant gets is the the monthly figures of profits etc. Plus the big advantage is, you have advice just a phone call away and the accountant tells me the best way to go regarding expenitures on a van and things, he is worth his weight in golden nuggets.

 

[BertUK]

being self employed you only pay tax on your profit so any receipts for tools,materials,anything you use for work basically will come off your total for the year,say you earn 30k total for the year,and you spend 12k on materials,tools,stationary,clothing,your gross profit would be 18k,then you deduct your personal allowance,which should be around 7k,so your gross profit has gone down to 11,k.if you have a good accountant like me then he will take into account depreciation of vehicles and tools value so you might claw back another 2k over the year therefore your net profit after everything considered would be 9k......thats the amount you would be taxed on...hope this helps.

 

[Geordie Spark]

Don't forget whenever you buy new clothing - even if it's just socks, shoes & undercrackers - to put it through the books as "workwear". That nice new suit you bought for weddings & funerals is what you bought to wear when you're visiting clients isn't it?

Going to the pub with your mates (sorry - potential clients) can also be claimed as "entertainment" & so can those nights out to the restaraunt with your lass.

Claim for your coffee & bacon butties at the Greasy Spoon as "sustenance" and the newspapers & magazines you buy as "Trade Papers" and / or "Marketing" - you buy them to check-out your competitors adverts don't you?

And, when Your Lass buys soap powder & other cleaning materials for the home, put that through too!! After all, your workwear needs to be washed, and the part of your house that you use as your office has to be kept clean & tidy too!!

That new carpet you bought for the bairn's bedroom was for the spare room that you use as your office.

A proportion of your household utility bills - gas, water, telephone & electric etc - can also be claimed against tax too. Just shove everything through & let your accountant decide what you can get away with.

Years ago, I was caught out by the then Inland Revenue who assesed me as owing them about £300. I hired the services of an accountant who happened to be an ex-Inland Revenue bloke. It was he who gave me the info. I posted above. By the time he had finished, he had obtained a refund of £1,200 from the Revenue, & he charged me about £200. Money well spent I think.

 

[Knobhead]

Before I was divorced I was married to a tax inspector. I was running two separate businesses back then, not electrical. She would not allow me to claim for anything I wasn’t entitled to. I was amazed at what I was entitled to. Every year I’d get a refund from the taxman.
Depreciation was my favourite, a lens for my Bronica camera cost me £1200 2nd hand. After 4 years on the books it was worth zilch. Sold it for £1600.