self employ newbie question

Chi_2

daxu wrote:

can I put the cost of buying the car as a business expenses, expecially if I buy it second hand (my friend is selling a quite nice ford focus ;-) )?

No. A car counts as capital, which is not permissible as a normal expense. As such you are only allowed to claim a proportion of the cost each year. Assuming your car is under £12,000 you can claim 40% on the first year, and 25% of the remaining value (i.e. 60% of the cost) in following years. It is quite complex to get your head arounnd when you are first starting out. (As an aside, I second that it really is a good idea to chat with a small business advisor, as there are so many things you might not think to do that turn out to be important!)

Also, the car must be wholly used for the business. If it is not, you must reduce the claim in proportion to the balance between business/non business.

This means if you are driving the car daily, and only work 1 day a week, it is likely to be only about 15% business use.

The other thing is (and I'm sure you know this) that you must inform HMRC within 3 months of starting to trade, else they can whack you with a £100 penalty.

daxu

Hi Thanks.
I am bit clear bout the expense staff now.
Actually, do you think should I even register to become a self-employed person? The reality is that all of my customers now are my relatives in US (because it is a direct sale thing and they love it in US). The money I earned will be put into a US bank account and no chinese taxman will ever show any interest and I only use it for holiday spending (when I get there).
If I registered as self-employed, will I need to provide all my customers' addresses, payments and my details in the bank? Looks like lots of work for the 1200£ yearly profit.

Cook_County

You have used the word "earned", which is in the past tense. Therefore you have been self-employed. There is no question about this.

HMRC are likely to automatically receive details of both the income you have been paid and your US bank account under the automatic exchange of information clauses in the US/UK double taxation treaty. It will be impossible and criminal to hide from the tax authorities.

You need to have registered as self-employed. The advice above by other posters to this forum is entirely sound.

daxu

Sorry, should be will earn actually as they agreed to pay me but I haven't ordered anything yet.
Ok, seems I have to tell the tax man.

Cook_County wrote:

You have used the word "earned", which is in the past tense. Therefore you have been self-employed. There is no question about this.

HMRC are likely to automatically receive details of both the income you have been paid and your US bank account under the automatic exchange of information clauses in the US/UK double taxation treaty. It will be impossible and criminal to hide from the tax authorities.

You need to have registered as self-employed. The advice above by other posters to this forum is entirely sound.

Aark

Assuming your car is under £12,000 you can claim 40% on the first year, and 25% of the remaining value (i.e. 60% of the cost) in following years.

There is no First Year Allowance on cars, so the Writing Down Allowance at 25% of the reducing balance applies from the first year (with a maximum of £3,000).

daxu

Actually will the software taxCalc solve most of my questions? It would be nice if I can have a free version to try on.

Chi_2

Aark wrote:

There is no First Year Allowance on cars, so the Writing Down Allowance at 25% of the reducing balance applies from the first year (with a maximum of £3,000).

Oops. This is absolutely correct. Sorry for the misleading info, people!

Debt_Free_Chick

daxu wrote:

Actually will the software taxCalc solve most of my questions? It would be nice if I can have a free version to try on.

Taxcalc will help with your tax accounts/return. But you would normally start with trading accounts first and then adjust them for tax purposes.

Taxcalc asks you to put in your total expenses and then the disallowable ones. Taxcalc can't work out which expenses are disallowed - only you (or an accountant) can do that.