Why it makes sense to buy a new laptop ...

slhqoue

I have a few questions and a calculation I want to check with people!

The basic rate tax limit for 2014/15 is £31,865.

I earn £28,560 gross (PAYE) plus I'll be earning £4,000 in freelance income = a total of £32,560.

1. According to my calculations, this means I need to claim £695 expenses to avoid paying the higher tax rate, correct?

2. Will the £4,000 freelance income only have basic/higher rate tax deducted, or will any of national insurance, pension and/or student loan repayments also be deducted as with my PAYE income (I'm assuming pension won't be - how about NI / Student Loans)?

3. If I buy a new laptop (with an educational discount) and claim half of it as expenses for the freelance work, I will actually end up paying £224.40 less tax. This is based on the following calculation. My third question is - does this calculation look right?

A new 13” Macbook Pro costs £1,122. If I claim 50% of this cost as a business expense, that’s £561.I also need a new printer, which will cost £39. So that’s a total of £600.

With Macbook Pro

Of the £4000 freelance income I will pay tax on £3400. Of this, I will pay basic rate on £3,305 (bringing my overall income up to the basic rate tax limit) and higher rate on £95. This means I will receive £3,301 and pay £699 in tax.

Without Macbook Pro

Of the £4000 freelance income I will pay tax on £3,961. Of this, I will pay basic rate on £3,305 and higher rate on £656. This means I will receive £3,076.60 and pay £923.40 in tax.

notanewuser

You're forgetting the £10000 tax free allowance. You won't pay any higher rate tax even if you don't buy the laptop.

Gas_Powered_Toothbrush

The basic rate is in addition to the personal allowance. On a total income of £32560 you won't pay any higher rate tax.

slhqoue

Ah! I see!

So does this mean you will only pay higher tax rate if you earn over £41,865?

This changes my calculations to:

With Macbook Pro

Of the £4000 freelance income I will pay tax on £3400. I will pay £680 tax and receive £3,320.

Without Macbook Pro

Of the £4000 freelance income I will pay tax on £3,961. I will pay £792.20 tax and receive £3,207.80.

notanewuser

slhqoue wrote: »

Ah! I see!

So does this mean you will only pay higher tax rate if you earn over £41,865?

This changes my calculations to:

With Macbook Pro

Of the £4000 freelance income I will pay tax on £3400. I will pay £680 tax and receive £3,320.

Without Macbook Pro

Of the £4000 freelance income I will pay tax on £3,961. I will pay £792.20 tax and receive £3,207.80.

No, because if you buy the laptop you'll have less cash!

£4k income minus £680 tax minus £1200 for the laptop = £2000 in your pocket.

notanewuser

Ps, if I was editing books for a few hours a week I wouldn't be buying a 13" MacBook! And I'm a lifelong mac user!

slhqoue

Haha yes I know that, I just think if I'll save paying £112.20 tax and I want to buy a new laptop anyway, it makes sense to do this.

Also, the Macbook is not just for editing books, I also do a lot of Adobe photography work using Photoshop and Lightroom.

notanewuser

slhqoue wrote: »

Haha yes I know that, I just think if I'll save paying £112.20 tax and I want to buy a new laptop anyway, it makes sense to do this.

Also, the Macbook is not just for editing books, I also do a lot of Adobe photography work using Photoshop and Lightroom.

On a 13" screen?

A lot?

I think you're trying it on a bit.

You don't need a mac to use photoshop or Lightroom.

slhqoue

Ok fine, but I didn't come on here to get advice of whether I need a Mac or not!

Would you be able to help with this question?

Will the £4,000 freelance income only have basic/higher rate tax deducted, or will any of national insurance, pension and/or student loan repayments also be deducted as with my PAYE income?

slhqoue

No I don't have a clue what I'm doing, I haven't registered as self employed before. That's why I came onto this forum to ask for advice!

Why do you have to take such a mean-spirited tone, when my questions about paying NI / Student Loan on additional self-employed income seem like legitimate ones to me?

purdyoaten

slhqoue wrote: »

No I don't have a clue what I'm doing, I haven't registered as self employed before. That's why I came onto this forum to ask for advice!

Why do you have to take such a mean-spirited tone, when my questions about paying NI / Student Loan on additional self-employed income seem like legitimate ones to me?

Two things:

1) There would be no Class IV NIC payable on an income/turnover of £4000

2) You must restrict your claim for any private use on the laptop unless, of course, you are maintaining that it is 100% used for THIS business.