Self Assessment Capital Allowance - am I doing it right?

TH_Music

Hi,

Just trying to complete my Tax Return for my 2nd year of Self-employment (14-15), and am struggling to understand the different elements of the Capital Allowances.

I had an accountant to do my 1st year and it all looked rather straight forward, that is apart from this Capital Allowance section.

I have read the HMRC guidance on this, but I find it confusing. So, if there is anyone who is able to help / guide me on this, I'd be extremely grateful.

Here goes . . .

In 2014-15 I purchased a laptop computer for £1400. Am I right in thinking that this expense goes down as 'Annual Investment Allowance'?

I have then used the 'Other Capital Allowances' to include the taxable value (the 18% thing) of my previous equipment purchases (musical equipment).

Also, am I right in thinking that the computer then becomes 'Other Capital Allowance' in future years?

Any help is very much appreciated,

Thanks in advance

Tom

booksurr

others will have to answer your direct question but in principle capital allowances work as :

either: you take 100% of the cost of the item in the year you purchase it as an expense against that year's income. Obviously therefore there is nothing left to carry over to the next year. That is called the Annual Investment Allowance


or: you take a part of the cost each year for as long as it take for the residual balance carried over each year to reach zero, that is the 18% "thing"


note it is an either or situation for each individual capital item

most small businesses take the annual allowance option as that way it matches your actual cash outlay so gives you the immediate effect of reducing your tax in the year you actually spent the cash

[Deleted User]

I completely agree - not sure how the laptop computer can be considered under 'other capital allowances' after the cost has been claimed in totality in the year of purchase.

td23

Am I right in saying that if this was a laptop bought on finance, you could claim the £1500 cost of laptop in your AIA, then in the following years you can claim the interest charges on the finance? Or am I way out?

TH_Music

Brill, thanks very much!

I think I get it now :-)

This was the only thing about my SA that was confusing me, but when put clearly by a real person, it's actually pretty straight forward. For some reason I didn't pick up on the either/or nature of this situation, so thank you for that.

Cheers,

Tom