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Most small businesses qualify for 100% first year writing down allowances. This means that you can effectively offset the whole cost of your van against taxable profits. Previously you could only offset 25% of the cost per annum but you can now accelerate the benefit.
So let’s say that you make a taxable profit of £35,000 in the tax year to 5th April 2012. If you’re a 40% tax payer you would then be expected to pay £14,000 tax to the Inland Revenue by 31st January 2013.
If you buy a new van at any time in that tax year i.e. up to and including 5th April, you can offset the whole cost against your taxable profit. So say you bought a van for £10,000 – you can reduce your taxable profit by £10,000 to just £25,000.
Thus you defer paying £4,000 to the tax man!
As an example, the £10,000 van could cost £252.93 per month on Hire Purchase over 48 months.
Consequently the £4,000 that the tax man has saved you will pay your Hire Purchase payments for 15 months!
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