1st Time Freelancer

Prothet_of_Doom

drummingbob wrote: »

Thinking about it, it could be considered to be the accumulation of an asset, rather than an outgoing expense. I'm not sure if that makes a difference.

Depending on the value and expected life a laptop could be either. I would put it through as an expence and reduce tax in year one, rather than as an asset and have an ammount for depreciation in years 1 to 3 (I think HMRC accept either is acceptable)

macman

Your capital expenditure has to be proportional to the sort of business you are running. Obviously a video producer might be expected to spend rather more on IT equipment than a hairdresser. And it has to be proportional to your turnover-if you claimed zero profit because you'd bought 5 laptops, then they'd be questioning what you were actually living on.
If the equipment is not used exclusively for the business then you can only claim a percentage-the same as with your motoring expenses.

heretolearn_2

"I'm assuming that anything I claim back would be knocked off the 30% that I will have saved, hopefully leaving me some left in the bank."

You really have to get your head around this. I meet lots of new businesspeople who imagine somehow what they buy for their business 'comes off their tax bill' and so is essentially FREE STUFF! (in their heads). The HMRC doesn't pay for anyone's business equipment. People have shown you how it works.

I'm also not sure where you are getting 30 per cent tax from. If you are a lower rate tax payer it is 20 per cent.Another example:

WHAT YOU IMAGINE
Total SELF EMPLOYED income - £20,000
Expenses and equipment bought - £4000

Tax on £20,000 @ 20% = £4000
Take away the £4k I spent, hey I don't owe any tax

BUT HOW IT REALLY WORKS
Total SELF EMPLOYED income - £20,000
Expenses and equipment bought - £4000
Profit = £20k - £4k = £16k
Tax on profit of 16k @ 20% = £3.2k to be paid to HMRC

Percy1983

Well most things appear to be covered, as it is my first 2 years have ran at nil profit due to buying a lot of equipment and they haven't questioned this, with that they can see the increase in turnover due to capital spend.

In my case I do run 2 PCs, one is an encoding mule which is 100% business use and the other is a monster which I also use of gaming to which I claimed 40%.

Mileage is 45p a mile just keep a good log of start and end mileage/dates/destinations.

devils_spawn

I've read everything above and only have one piece of advice for you - find a good local accountant who can help. They are normally around £40 per hour and you'd probably only need 2 hours of advice.

Don't rely on forums to give you answers as misleading information could cost you.

Suarez

devils_spawn wrote: »

I've read everything above and only have one piece of advice for you - find a good local accountant who can help. They are normally around £40 per hour and you'd probably only need 2 hours of advice.

Don't rely on forums to give you answers as misleading information could cost you.

Totally agree. Lots of bad advice on this thread so far. You don't want to get caught up answering questions to the tax man!

To add to this - most accountants give a first meeting for free.

Percy1983

Rather than just say there is loads wrong why not dispel the myths/wrongs so others don't take such bad advice.

It is worth looking into the annual investment allowance, as a way for writing assets off in full on the year of purchase.