self employment

fkelanne

hiya all, i need some help...
I went self employed in june..I have been told i can claim my expensives back..
I new you could claim some things back, but my friend got a laptop and printer and she said she will get the money back at the end of the tax year?? is this true? and will she get all of her money back for things like this?surely not..

InsideInsurance

I assume my self employed you mean you are acting as a sole trader? Have you registered yet with HMRC as a sole trader to do tax returns and pay your NI?

After April 12 you will need to do an annual tax return, on this you state what your incomings were for the business and likewise the business outgoings. The difference between these is your profit (or loss) and it is on the profit you will pay tax.

You will not actually get money back, unless you are an employee as well, more a case of you not having to pay as much in the first place. If you are both employed and self employed then there is some chance of rebates.

The only other way to "claim money back" is if you are VAT registered. If you are projecting the next 12 months to be below the legal threashold then it generally is only worth doing voluntary registration if either you are selling 0% rated items/ services or are heavily weighted to selling to other VAT registered businesses. If this isn't the case then yes you could claim back all the VAT on the business items you buy but you'd have to pay HMRC over 17% of your sales as VAT or increase your prices by 20%

waderr

Am not sure tat she ill get back money.

fkelanne

i didnt think she would be she seems to think she will. i have just became self employed myseft. and was just wondering.

KiKi

In simple terms, what she is probably referring to is claiming the items as expenses. You don't 'get your money back' - although that seems to be a popular misconception.

As an example, let's say you are a sole trader who makes £10,475 profit this year. Your personal tax allowance is £7475, so you have to pay 20% tax on the remaining £3000 profit.

Now let's say you have £1000 of expenses. You take this off the profit, to make £9,475. Now you only have to pay 20% tax on £2000.

So when you claim expenses (say, £1000), the overall effect is that your personal tax allowance goes up by the amount you've spent on expenses (eg, to £8745), which reduces the amount of tax you pay.

So you don't 'get your money back', but you pay 20% less in tax for that £1000 (or whatever the expenses are).

I hope that helps explain in very simple terms.
KiKi