Self Employed ofset PAYE?

stalkah

Hi All,

Wondering if anyone can help. I'm employed and my employer pays my tax via PAYE.

I've decided I want to do a bit of work on the side (employer is fine with this). Whilst I'm setting up, purchasing hardware, domains, web site etc etc. Am I able to offset any of these costs against my PAYE Tax? I've purchased most of them earlier in the year but have yet to make any invoices, so the costs are in 2013/2014 tax year but income will be 2014/2015.

I normally fill out a online self assessment annually.

Thanks

thenudeone

[STRIKE]No.
AFAIK expenses relating to employment or a business can only be offset against income from that employment.

So, for example, the cost of purchasing plumbing tools can't be offset against your income as a childminder. If you have no income from plumbing, you'll just have to take it as a hit.

But have a look here and see what it says:
https://www.gov.uk/government/publications/480-expenses-and-benefits-a-tax-guide[/STRIKE]

EDIT: Wrong again. That's the third time this millenium.

antrobus

If the business has nothing but costs in the 2013/2014 tax year, then the business will have made a loss, and loss relief can be claimed against other taxable income. Such as income from employment taxed under PAYE.

However, if you have "yet to make any invoices" then it could be argued that you haven't actually got a business as yet, and that what you have in the 2013/2014 is 'pre-trading expenditure' which is treated as having treated been incurred on the first day of actual trading, presumably sometime in 2014/2015. Ergo there is no loss to claim in 2013/2014.

Are HMRC aware of your business venture. As in, have you registered as self-employed?

purdyoaten

thenudeone wrote: »

No.
AFAIK expenses relating to employment or a business can only be offset against income from that employment.

So, for example, the cost of purchasing plumbing tools can't be offset against your income as a childminder. If you have no income from plumbing, you'll just have to take it as a hit.

But have a look here and see what it says:
https://www.gov.uk/government/publications/480-expenses-and-benefits-a-tax-guide

Not much of this is correct I am afraid. Losses from a self-employed business can be set against total income - one could indeed set plumbing business losses against childminding business losses or PAYE income as a brain surgeon. The link to HMRC publication 480 relates to employee or director expenses only, nothing to do with business losses.

stalkah

Thanks, yes I am registered as self employed. Is it best I try and speak with an accountant to look into this for me?

thenudeone

purdyoaten wrote: »

Losses from a self-employed business can be set against total income - one could indeed set plumbing business losses against childminding business losses or PAYE income as a brain surgeon.

It would appear that when I said AFAIK, it wasn't very far, but at least I have learned something:
The rules are different for self-employed people.

http://www.hmrc.gov.uk/incometax/self-emp-special.htm

zenmaster

purdyoaten wrote: »

Not much of this is correct I am afraid. Losses from a self-employed business can be set against total income - one could indeed set plumbing business losses against childminding business losses or PAYE income as a brain surgeon. The link to HMRC publication 480 relates to employee or director expenses only, nothing to do with business losses.

So you are saying I could set myself up as a self employed holiday rental company and buy a villa in Spain, a boat charterer and buy myself a 55ft ketch, an experience day provider with a Porche 911 and set the lot off against the day job?

It's not hard to make a loss.

Wow. I'd be a veritable entrepreneur, and a lot easier to organise than an offshore Cayman account.

Why doesn't everyone do this?

purdyoaten

zenmaster wrote: »

So you are saying I could set myself up as a self employed holiday rental company and buy a villa in Spain, a boat charterer and buy myself a 55ft ketch, an experience day provider with a Porche 911 and set the lot off against the day job?

It's not hard to make a loss.

Wow. I'd be a veritable entrepreneur, and a lot easier to organise than an offshore Cayman account.

Why doesn't everyone do this?

Two good reasons spring to mind.

1) You only obtain tax relief for the loss. A loss of £10000 would result in a refund of £2000 if you were a basic rate taxpayer and had paid £2000 tax. That still leaves you £8000 out of pocket. If you paid no tax, the loss is unrelievable.

2) The business would have to be seen as viable and created 'with a view to making profits' to exclude the kind of scenario that you quote.

Additionally if the business is a LTD Company, you are not self-employed. The company is an entirely different entity.

zenmaster

purdyoaten wrote: »

Two good reasons spring to mind.

1) You only obtain tax relief for the loss. A loss of £10000 would result in a refund of £2000 if you were a basic rate taxpayer and had paid £2000 tax. That still leaves you £8000 out of pocket. If you paid no tax, the loss is unrelievable.

2) The business would have to be seen as viable and created 'with a view to making profits' to exclude the kind of scenario that you quote.

Additionally if the business is a LTD Company, you are not self-employed. The company is an entirely different entity.

Oh well. It was good while it lasted .