Credit card interest

[rocketmanbkk]

Hi Friends

So, I buy all my materials in a credit card.

I usually pay it off every month with what I get paid.

If I don't pay it off for some reason, can the interest charge be put as an expense? Or it is my tough cheese?

Happy Sunday

Rct

 

[rpm]

Tough cheese

 

[rocketmanbkk]

As I thought !!!!!!!!

 

[rpm]

Sorry to be the one.

 

[Masood]

Tough cheese

Really? I was told that interest on business loans could be offset against tax. That could be wrong information but just what I was told..

 

[rpm]

I didn`t read it as a proper business loan just a credit card.

 

[Ray Stafford]

I don't see why you shouldn't, so long as you only claim the interest on the materials relating to the business, and keep proper records.

If you had a business overdraft, the interest and charges on that would be a legitimate expense.

However, it might be wise to check with an accountant rather than us lot.

 

[rocketmanbkk]

Thx. I agree with Ray. I just found this

Advertising, marketing and promotional costs can be classed as expenses, as can fees you pay to an accountant, solicitor, surveyor, architect, stock taker, etc. You can also claim back interest and alternative finance payments on bank and other loans (including overdrafts) and alternative finance arrangements, as well as bank/credit card charges and

 

[rpm]

Then I stand corrected

 

[village idiot]

Any business expense is tax deductible.
You incured the interest on the card as a result of you doing business, not because you did home shopping or went abroad on holiday.

 

[kris]

I'm not to clued up about credit cards as I've only had one with a small limit. I've an account with Travis perkins as its the only merchants we have but when I get materials I pay with my bank card there n then soley because I like to know I'm not getting invoices in at end of month as I struggle doing all my paperwork as it is and by paying everything means it's simply receipts that come in at end of month which I file away.

 

[Paulplumb]

Whilst we are on the subject of tax... My mate thinks I am silly for buying a van as I can only get reimbursed for the tax value of the money I spend repaying the van. He says it is better to lease a van as he gets 100% of the lease fee back. or do I have the wrong end of the stick?

 

[village idiot]

If you lease the van, you get 100% tax deductible expense, so every penny is set off against your tax burden.
If you buy the van, you are allowed to charge DEPRECIATION on the van. Most will either charge a reducing balance or say 20/25% pa on the value/remaining value of the van. When I was in that field (12 yrs ago), you were only allowed a minimum of £3,000 for the first year. So if your van cost £35,000, the maximum you can claim in depreciation for a year is £3,000. That might have changed over the years, I do not know. If eventually you sell the van, then two possibilities exists:
- If you sell the van at a profit, you have to pay the tax man
- If you sell the van at a loss, you are paid the difference by the tax man.
So in effect, you really loose nothing.

 

[rpm]

Any business expense is tax deductible.
You incured the interest on the card as a result of you doing business, not because you did home shopping or went abroad on holiday.

So whats the point of paying all of the balance due at the end of the month? Are you saying that a new start up business could get away with building up their cash flow by just paying the minimum amount due and claiming the interest occurred as tax deductable, somehow this doesn`t sound right to me.

 

[village idiot]

So whats the point of paying all of the balance due at the end of the month? Are you saying that a new start up business could get away with building up their cash flow by just paying the minimum amount due and claiming the interest occurred as tax deductable, somehow this doesn`t sound right to me.

It may not sound right to you, but I do not make the laws. I just follow/apply them.

BTW, how will a new business build up their cash flow? What most people do not realise is that the tax system is very fair. All you have to do is play by the rules and everyone is a winner.
- If a new business only pays the minimum amount on their credit card, then at the end of the month, or financial year, they have less profits to show as much of the profits would have been absorbed in credit card interest charges. So that leaves little or no money to the business to. How does that increase cash flow?

 

[rpm]

Correction, cash to play with then

 

[village idiot]

Correction, cash to play with then

OK, let us keep it simple and go with your initial observation that it leaves the new business with a better cash flow than those paying their monthly balance in full.
But it comes with a price. The more their CC balance grows, the more interest they have to pay. So long as the interest is incured in the process of doing business, it is tax deductible. But the downside is that the business owners/proprietors will have less money to pay themselves as most of the profits will be eaten up in interest payments. So no body wins (except the CC co). Taxman gets no payment, owners get no money to go on holiday, and before long, the overspend leaves the new company in trouble and they soon go bankrupt

 

[rocketmanbkk]

So what if you buy a van, put )5k down & pay £250 per month. Is that all deductable? Figures are examples only!

 

[lame plumber]

you get your account to write it down on your balance sheet and account for it at each year end, its not rocket science , so I just do that myself and make sure my figures agree with the accountants.

 

[Ray Stafford]

Tax relief on vehicles is complicated, and there are lots of different schemes all of which have slightly different tax treatments. To be honest, my eyes start to roll when our accountant starts to explain it to me.

But remember - tax relief is only helpful if you are paying a lot of tax. If you are only paying tax at (say) 20%, then a £100 deductible expense is a £20 cost to the taxman, but remains a £80 cost to you.

When people hear the words "Hundred percent tax deductible" a lot of them think that means that all the cost falls on the tax man.

It doesn't.

It means that all the cost counts in the calculation - but the taxman only hurts at your marginal rate. You take the rest of the pain.

 

[lame plumber]

well explained Ray, a lot of folk dont see the whole picture, especially with vat and do I dont I

 

[rpm]

OK, let us keep it simple and go with your initial observation that it leaves the new business with a better cash flow than those paying their monthly balance in full.
But it comes with a price. The more their CC balance grows, the more interest they have to pay. So long as the interest is incured in the process of doing business, it is tax deductible. But the downside is that the business owners/proprietors will have less money to pay themselves as most of the profits will be eaten up in interest payments. So no body wins (except the CC co). Taxman gets no payment, owners get no money to go on holiday, and before long, the overspend leaves the new company in trouble and they soon go bankrupt

Way yer go Lewis and as for Rosberg well.....
VI you really baffle me with some of your posts and I`d really like to sit down and chat over a beer but I never go to London nowadays so that ain`t gonna happen anytime soon.

 

[Nostrum]

Basically any interest you pay is coming out of your profits but as it is an expense you can also claim tax relief on. Ray has explained tax relief well above.

I've met many people who believe that if they buy tools or even fuel then they don't have to pay for them because they are tax deductible so they'll get all the money back at the end of the year from the tax man!

 

[Ermintrude]

A handy pointer .... If your slippers are stupid enough to take Amex get a platinum card....... You get 7% cash back on all purchases!

Or a Barclays reward card. I gets 5% on all transactions

That's £300 a month for using a card!

 

[Millsy 82]

My dad/accountant tried to explain how tax works and he went on for ages about this and that and confused the hell out of me. I said I thought it was I have my turnover take my expenses out of that and then I pay tax on what's left. Now I think he got fed up of my stupid questions so just replied kind of.

I was pleasantly surprised at what you can claim.

 

[stevetheplumber]

My dad/accountant tried to explain how tax works and he went on for ages about this and that and confused the hell out of me. I said I thought it was I have my turnover take my expenses out of that and then I pay tax on what's left. Now I think he got fed up of my stupid questions so just replied kind of.

I was pleasantly surprised at what you can claim.

that is basicly correct you only pay tax on what you draw out of the company so income less expenditure leaves you with profit if interest on a credit card has been charged in connection with the buisness that is an expenditure as ray pointed out you have still paid out for items whithin your expenditure so that amount is now missing from your profit

 

[stevetheplumber]

thing is with lease vans its never yours and you have to return it in good condition ive seen a few vans disapear in the run up to return time

 

[brum]

thing is with lease vans its never yours and you have to return it in good condition ive seen a few vans disapear in the run up to return time

I leased a van years ago transit 6 months old 46.00 per week was a very shrewd move at the time
this was my theory " why do you buy a drill ? " you don't need a drill you need a hole.
Why do you need a van ? simple best part is you could at the time purchase for peanuts at end of term or get another ,my opinion would be to sack it before it costs money and get a new one all tax deductible of course..brum

 

[cr0ft]

I considered a lease van for our new van but decided against it in the end. The cost per year of leasing a new van vs owning an older (but still reliable) van just wasn't worth it to me. Throw on the other downsides of leasing i.e. most companies sting you for charges when you return it, unable to signwrite it without having the ghosting removed after and it's not worth the hassle imo.

Would be different if you had a large fleet, at that point management of the fleet becomes an issue if you own a lot of 2nd hand vans. For small business I'm not convinced leasing is the way to go. Just my opinion.

 

[brum]

Hi croft twas 1989 when I leased my van things will have changed by now but it was more tax efficient to do so then I was going to buy a new transit my accountant steered me toward leasing.
If I did not have any skeletons in cupboard may well go back down same route vans do not have to be brand new and signwriting now is vinyl easily removed back in 1989 it was actually painted on.
I think ill stop now beginning to feel like a dinosaur..brum