Tax 'numpty' needs advice!

Legacy_user

I am thinking of starting a small part-time biz from home and need to but some equipment and take out a loan. I understand that I can claim the equipment and loan interest as a capital expense on my tax return.
My question is how this works. If my taxable income is less than my tax allowance anyway (which it may well be in the first year) that won't make any difference to me will it? Because I won't owe any tax anyway?

tru

That's what I thought too, but someone told me it affects tax credits. I'm recently self-employed so I'm learning as I go ::) ;D

123sl456

It will make a difference!!!

Tax reductions called capital allowances relating to the cost of the equipment, and the interest, will as you say be deductible from your taxable income in this trade. The beauty is that, even if your taxable income is less than your taxable expenses in the year, you will have made a loss WHICH SHOULD BE ABLE TO BE CARRIED FORWARD TO FUTURE YEARS! Therefore, if you make a taxable profit in a future year, the loss you have brought forward should reduce your tax bill in the future! Fantastic.

Speak to a professional tax adviser or accountant if required to get total clarification.

Hope this helps and makes sense.