argh help

aimtosave

Being a newly self employed person I am hoping for some advice regarding timing of my tax year.

Following education, I started self employment Dec 07 to date. For mitigating circumstance I am only now submitting my 07/08 accounts for which I have prepared Dec 07-Apr08 ready to be submitted. I have now been informed I can choose to declare my tax year Dec to Dec if I wish. I am looking for someone to confirm my suspicion that I may be better off if I do this in my situation. Being a newbie, free choice has completely thrown me so need some advice!


I'll fill you in...

Dec07 to Apr08 I turned over ~£12K
Apr08-Apr09 I turned over ~£35K

If I counted my first year Dec-Dec then:

Dec07-Dec08 I turned over ~£35
Dec08-Dec09 I expect to turn over ~£35

To me it seems logical to choose a Dec-Dec cycle so I can deduct the entire 40% of my capital allowance in the first year rather than only 4/12 of the 40% if I end in April.

I would also currently still be in only my second tax year (til Dec09) and hence could continue to make tax deductible purchases for the 08-09 tax year (in which due ti other ties I didn't utilise fully).

Have I got the wrong end of the stick??

Kindest regards

Aimtosave

Bermuda_John

your taxed on your profits not your turnover

do you know your profits for the periods above.

Im not up to date on capital allowances these days, do they still do 100% First year allowances on computers etc?

Dont forget to take off all of your expenses including some "accounting adjustments" like:

Use of home as office £2 a week
Motor Expense ..... use mileage allowance if car isnt in the business already

You can do your year end ot where the hell you ike but your still taxed ......... upto April if you're a sole trader ..... therefore its easier to do it to april to avoid any confusion

As a limited co, the year end is what determines your tax year.

aimtosave

thanks for the rapid response


Dec07-Apr08
Turnover £12K
Expenses £1500
Capital allowance £200 (40% of £1500 capital during 4 months)

I haven't compiled by accounts for the next tax year yet so haven't got breakdown profit figures to hand but presume turnover:profit proportion will be similar

Thanks again

aimtosave

lol just noticed a smiley crept in unknowingly when typing "turnover : profit" lol

aimtosave

Have just estimated my profits for the next yr...

Apr08-Apr09
Turnover @£35K
Expenses/Capital allowance £6000 (assuming 100% new rule)
Rollover 07/08 Capital Allowance £1300 (60% of roll over £1500)

Please correct me if my thinking is all wrong it's all new to me...

Elaine_Wilson

aimtosave wrote: »

Dec07-Apr08
Turnover £12K
Expenses £1500
Capital allowance £200 (40% of £1500 capital during 4 months)

If you spent £1,500 in that period then the First Year Allowance would be 40% = £600. (See the second paragraph in this link.)

Does this affect your calculations?

Elaine_Wilson

aimtosave wrote: »

To me it seems logical to choose a Dec-Dec cycle so I can deduct the entire 40% of my capital allowance in the first year rather than only 4/12 of the 40% if I end in April.

I would also currently still be in only my second tax year (til Dec09) and hence could continue to make tax deductible purchases for the 08-09 tax year (in which due ti other ties I didn't utilise fully).

Have I got the wrong end of the stick??

Just reread your first post and I'm not sure if you've got the current year basis of assessment clear. If you take the accounts to 5th April each year then the profits would be assessed as follows -

2007/08 - Period December 07 to 5th April 08

2008/09 - April 08 to 5th April 09, and so on.

If you take the accounts to (say) 30th November (assuming you started on 1st December then the profits assessed would be -

2007/08 - Period Dec 07 to 5th April 08 (calculated as 4/12ths of the full year's profits to end November 08.

2008/09 - Year ended 30th November 2008

2009/10 - Year ended 30th November 2009, and so on.

So for any additional capital expenditure you make now you will only receive the relief in 2009/10.