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.