Self-employed: confused about capital allowances et all

BubbleOfLife

I called the Self-assessment Helpline a few times and when I finally get to speak to somebody, he/she cannot answer my question, or I get cut off.
(This is my 6th year working as self-employed and I have never used an accountant because of the expenses involved.)
So, here are my questions (and confusions):

1) I bought a new computer in 2007 and I use 80-90 % of it for work, the rest for personal use. It cost me £275.
How much do I deduct as capital expense/allowance?

2) I have had a few changes in my expenses and accumulated £157.47 for software programs and ink cartridges for printer.
The helpline told me, last week, that I can deduct the whole amount. Is that correct? The same goes for mobile phone top ups & stationaries.

Thank you

sdooley

Unfortunately, the Revenue helplines are always very busy at this time of year. May be telling chickens to suck eggs but have you tried:

http://www.hmrc.gov.uk/selfemployed/index.shtml

in particular:

http://www.hmrc.gov.uk/helpsheets/hs222.pdf

ceeforcat

1) Capital Allowances £275 @50% = 138 less private use 20% = 110 claim

2) The helpline is correct (for once)

Elaine_Wilson

For 2007/08 the computer will qualify for First Year Allowance of 50% so this is the figure you put down in the capital allowances section.

It can be argued that you should restrict this claim by the proportion of private use but I would treat that level of private use as incidental and claim the whole figure.

I agree that you should claim the whole of the stationery costs.

BubbleOfLife

Thank you all for your replies and making it clear :-)

Doh

don't forget your can claim 25% of the remaining value in the following 4 years.. i.e. year 2 = 25% of £138 so £34.5, then year 3 25% of £103.5 e.g. £25.88 etc etc

obviously make adjustments for personal use if required

ceeforcat

I believe that a computer is still regarded as a short life asset - it can therefore be completely written off in year 3 or 4 as appropriate.

Doh

ceeforcat wrote: »

I believe that a computer is still regarded as a short life asset - it can therefore be completely written off in year 3 or 4 as appropriate.

i'm not sure i understand the short life thing? how does that benefit you?

mrsmyagi

It just means that instead of gradually taking a percentage off the closing value of an item you get to write the whole balance off in the third of fourth year (which means knocking more off your tax bill than if you just got a further, say, 25% off what the asset was worth). Does that make sense? :-)

Doh

so in the fourth year (taking a 3 year PC for example) you would claim the remainder of the balance?

so:

purchased for £1000
first year £500
second year £125
third year £93.75
that leaves approx £281 - you can claim the whole lot off?
I assume that means you need to actualy dispose of the item and you can't continue using it then?

ceeforcat

Your last calculation is correct. You do not have to dispose of the item but, if you did, you would have to net off the final claim. If you got, £50 for example, you would claim £231 in your example.