Question about capital allowance

pmorrison_2

Hi,

Im just starting to sort out my tax return for tax year 2007/2008 (Im self employed) and was just wondering about the rules for capital allowances. I know that previously it was 50% of the value of the tools but Im sure that I read somewhere that from this return onwards all tools under £50k are 100% deductable for capital allowance. Ive searched the HMRC site but their search function is so poor that I just cant find the answer.

Does anyone know if this is correct?

Cheers,

pmorrison

Merlin_Accounts

Hi

The changes to the capital allowances regime only come into effect from 6 April 2008, so its next year's tax return when you will need to check out the rules for claims under the new rules.

pmorrison_2

Ok at least Im ahead of the game on that!

What were the rules previous to that then? I had someone help me on the return last year but am doing it myself this year which is why Im not so 'in the know'! Am I right in thinking that you can claim for 50% for the first year and then each year after that is it something like 10 or 20%?

pmorrison_2

Right, I think Ive found the answer

http://www.coutts.com/newsandinformation/rates/corporationandcapitalallowances.asp

So I can write off 50% of this years tools and then I can also write off 25% of the value of last years tools as well?

Merlin_Accounts

You should find guidance in the self assessment tax return self employment help sheets on HMRC's website BUT, to answer your final question, yes, you get 50% of any equipment you bought in 07/08 tax year (but if any was a replacement you may be able to write it off 100% as a renewal,ie as an expense rather than as an asset).

With equipment bought prior to 07/08 you should have a residual value left over from last time's claim. Lets say, for example, you claimed 50% last year on £1k of equip, the residual to go into 07/08 would be £500, so this time you could claim £125 (25% of the residual).

pmorrison_2

Cheers mate, thanks for your help!