Self Employed + Full Time Employment - equipment related question

saskay

Hello,
I'm currently in a full time job with a basic pay of £75K and a potential bonus up to 20% of basic.

I've been studying photography for the past year and feel ready to jump into the deep end with some professional equipment. I also intend to continue to have my full time job as well.

My total equipment costs come to about £16K - which includes a DSLR camera, a few lenses and a drone. I would be looking to making this £16K investment in two lots of £8K 12 months apart.

I briefly spoke to an accountant who advised that I could claim the cost of the equipment as capital expenditure and would be offset against taxable income from the year previous. I don't expect to become profitable in the first year (probably breakeven in the 2nd year!).
(can't remember the exact wording from the Accountant - but this sounds about right)

The question that I have is how do I workout real cost of my equipment after taking into account the tax implications - is it as simple as the following:
1. If I earned £75K the past year and spent £8K on equipment this year - does that mean that my taxable income for last year should've been £75K-£8K = £67K.
2. With £75K income I would have paid about ~£19K in taxes (not including NI) but if it were £67K then the tax bill would've been ~£16K.
3. Am I correct in thinking I could get a refund of £3K?
4. Also, when I'm ready to make the second £8K investment at the end of year-1, would the above calculations still hold? If not, is it better to buy all the equipment in one ago (worth £16k)?

In addition, I also have a Mac Book Pro which I bought for £3K - and would be extensively used for image editing and some personal stuff. If I'm using the laptop for my photography- is there any tax I can reclaim.

Many thanks.

Private_Church

My first thought would be what a great way of making a hobby reduce ones tax liability on your main income.

I run a full time hands on business and enjoy metal detecting as a hobby so maybe I should look into investing in some new kit and offset the costs against my full time business but I really can't see HMRC allowing this one. I would have thought any photography equipment would only be offset against income raised from photography and not your other job but I am genuinely interested to know because as I say I enjoy metal detecting and would do the same if its legal.

I think if we can "get away with" this type of work everyone and his gran will be doing it but I wish you luck and I'm sure someone more knowledgable will be along shortly to give you accurate advice.

00ec25

Private_Church wrote: »

I think if we can "get away with" this type of work everyone and his gran will be doing it

obviously there are rules, an accountant can explain them to you and thus ensure that you can indeed "get away with it" if rules are followed

"... Don’t make any of these claims if you:
...
- don’t run your trade commercially and for profit, for example if your trade is run as a hobby"

00ec25

saskay wrote: »

I briefly spoke to an accountant who advised that I could claim the cost of the equipment as capital expenditure and would be offset against taxable income from the year previous. I don't expect to become profitable in the first year (probably breakeven in the 2nd year!).
(can't remember the exact wording from the Accountant - but this sounds about right)

Go back to the accountant and pay for full advice on your options? Invalid treatment of losses is one of the most common mistakes made by those trying to DIY.

https://www.gov.uk/government/publications/losses-hs227-self-assessment-helpsheet/hs227-losses-2017

Percy1983

I am am a photographer and videographer.

Videography I started with a £20 camcorder (Digital 8), a borrowed camcorder (miniDV) and 2 tripods at £10 and £15.

Photography I started with a used DSLR with a kit lens (Canon 1000d + 18-55).

I used what I had and bought/rented as I needed per job to generate more money to buy more kit for the types of work I was taking.

I have much more kit now and probably still don't have 16k worth.

So my question is what type of photography are you thinking of going into and what kit you looking at buying to achieve it. From there what is your potential customer base and how you going to attract them.

In short the best equipment won't make anyone an amazing photographer, but an amazing photographer will be fine and get the best out whatever equipment they have. By all means I have no idea how good you are, I just see a lot of people buying the kit and thinking they are photographer.

maisie_cat

It would be great to setup a "business" and use the "loss" to offset paye income tax wouldn't it?
But you can only offset costs against the income stream to which it relates.
The same with losses, so you cannot offset the loss against previous year income from a different stream.
I assume you are setting up a very fancy photography or film business £16k is a lot of money and hmrc might consider that it is really personal equipment

Pennywise

maisie_cat wrote: »

It would be great to setup a "business" and use the "loss" to offset paye income tax wouldn't it?
But you can only offset costs against the income stream to which it relates.
The same with losses, so you cannot offset the loss against previous year income from a different stream.
I assume you are setting up a very fancy photography or film business £16k is a lot of money and hmrc might consider that it is really personal equipment

Wrong - losses of a genuine business can be set sideways and backwards against other income sources.

[Deleted User]

maisie_cat wrote: »

The same with losses, so you cannot offset the loss against previous year income from a different stream.

This is incorrect

Taxation losses require specialist knowledge. Decisions regarding their utilisation are time restricted and irreversible. With respect, the advice that you have given displays little or no basic knowledge of the subject and it should be ignored..
With respect to the original question - the loss can be set against TOTAL income of the same year, the previous year or even as far back as three years previously (as it is a loss incurred in the early years of the business). It can also be carried forward against future profits FROM THE SAME TRADE.
There are two main steps in calculating loss relief. 1. Determine the loss appropriate to the tax year. 2. Allocate the loss. A loss for a tax year may involve more than one claim. So, op, what is the LOSS actually made in the business in the first year after detailing all income and expenditure etc?
This is on the premise, as previously indicated, that the business is carried on with a view to making a profit i.e. NOT a hobby!

saskay

This is more complicated than what I thought - so I will just pay someone to work all this out for me.

In short, I’m indeed looking start a genuine small photography business as it fits well with my day job and I also love the subject.

Thanks everyone.

Suarez

So you're saying you will purchase equipment for 16k and have no trading income. Then offset the 16k against PAYE income? No chance.

Suarez

As a side note - with your level of PAYE income, if you genuinely want to take photography seriously then a limited company would be the way forward. The profit would then be taxed at 19% rather than 40% and you could take £5k in dividends per year (subject to change).