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Advantages and disadvantages of claiming Capital Allowances

  • Member
  • Practice Licence
  • 164 posts
  • # 116084


I am currently completing a tax return for a driving instructor and due to low earnings they wont pay any tax or class 4 NI. They will be required to pay class 2 NI.

There are however unused capital allowances from a recent car purchase which could be used to drop income below the class 2 NI threshold.

Paying the class 2 NI however might be a good thing ie regards to being entitled to claim certain state benefits and can be paid voluntarily anyway.

I was going to ask my cient if they wanted to carry on paying the class 2 NI, so as to not lose access to any benefits. However at the same time I feel as if I should be using up these capital allowances to reduce their tax bill to zero. There is no indication that income will increase in the future so these CAs will go unused.

Or is there a better way I can deal with this situation.




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