Owe 60 Pence Tax on £617 Loss

cotswoldaccountant

You also need to ensure, before you claim a loss in your self-employment against your PAYE income for the tax year in question, that you are running a business "for profit" and not a business which HMRC might describe as a "hobby business" which makes a loss year on year. If this is the case, HMRC would only allow you to carry forward the loss to set against future profits from the same trade, rather than offsetting the loss against general income in the tax year.

I am not suggesting that your business necessarily is a hobby business - but it's something to watch out for!

pennypincher3562

Hi PurdeyOaten

Many thanks, I have adjust the loss to be offset against income from £123 to £617.

Now my calculation for tax to be refunded is £235.40. Apologies for my earlier blunders in following your advice. It's more from a total lack of understanding of the jargon, rather than not reading the posts.

I ran this 'business' more as a learning experience, than anything else.

Cheers
PennyPincher3562

purdyoaten

pennypincher3562 wrote: »

Hi PurdeyOaten

Many thanks, I have adjust the loss to be offset against income from £123 to £617.

Now my calculation for tax to be refunded is £235.40. Apologies for my earlier blunders in following your advice. It's more from a total lack of understanding of the jargon, rather than not reading the posts.

I ran this 'business' more as a learning experience, than anything else.

Cheers
PennyPincher3562

Great - from that I deduce that you are in or around the higher rate threshold at your PAYE source - most of the loss relief is at 40%, a tiny bit at 20%.

Losses are a very specialist area with punitive deadlines and the potential for losing relief - not for the beginner! Just remember to carry your 617 against your Class 4 next year.

The advice given by cotswoldaccountant is also very pertinent! HMRC do not like to subsidise hobbies!

pennypincher3562

Hi Cotswold

I started my 'business' with the intention of making a profit. I have made profit in past, and possibly will do so again. I also did it as a learning experience, obviously I have to start somewhere.

I also think most people would regard what I'm doing as a business activity, and not a traditional hobby.

Cheers
PennyPincher3562

pennypincher3562

Hi PurdyOaten

Yes, you are right, it's certainly not for the beginner, I've found doing this quite stressful, on top of my day job! Obviously if I made a profit, I'd pay an accountant. Fingers crossed, I might be able to do that next year.

Many thanks to all who have helped me!

Cheers
PennyPincher3562

pennypincher3562

Hi

I'm filling out my tax return again one year later, and I have returned to this thread.

I noted in the above responses PurdyOaten stated:

'Just remember to carry your 617 (loss) against your Class 4 next year.'

I'm not very 'tax literate', and would be very grateful if someone could explain in simple language why should I do the above, and what will be the outcome. Also are there any circumstances where I'm not eligible to do the above.

This is probably totally irrelevant, but I have a 'Class 2 NIC exemption' certificate valid until 2016.

Also should enter the £617 loss in from 2012-2013 in the following box:

'Loss brought forward from earlier years set-off against 2013-14 profits'

Many Thanks
PennyPincher3562

purdyoaten

You have a good memory. Have a look at post 4.

Now the problem is finding where to enter this. Unbelievably the relevant box does not appear on the short form of the self-employment section, only on the full version. So, you have to state at the start that your turnover exceeds £79000 and complete the longer version.
The net effect is to increase the amount above which you start paying Class IV NIC - the saving will be 9% of the £617 but only if your profits exceed £6512.
You may not think that the £54 or so saving is worth it - up to you.

pennypincher3562

Hi PurdyOaten

Thanks a lot for returning to this, one year later! It's not so much a 'good memory', but more the dread of filling out tax returns that brought me back here :-)

After reading your above instructions, I don't think this situation is relevant to me, because:

a) My turnover does not exceed £79000.
b) My profits do not exceed £6512.

One last question, do I need to enter my £617 loss in 2012-2013 in the following box:

'Loss brought forward from earlier years set-off against 2013-14 profits'

Many Thanks
PennyPincher3562

purdyoaten

a) that would not matter
b) that does matter and the relief for NIC cannot now be utilised.

Your other question - Definitely not - you claimed your loss last year against other 2012/13 income- you did not carry it forward.

pennypincher3562

Great thanks, very useful. I can now sort things out.

Thanks Again
PennyPincher3562