Offsetting tool purchase against tax

garyclay

Hi,

In recent months I’ve been using my DIY skills to help friends and family and really enjoyed it.
I’m considering doing self employed handyman type work in my spare time as I only work part time these days.
In order to do this it will probably mean acquiring some better tools. I understand I can offset the cost of tools against my income tax. Can I offset the cost of purchasing tools against my whole tax bill (current employment plus self employment) or is it just against my self employed income?
Thanks for your advice!

phill99

Only against your self employment. I presume you don't use your tools in your employed roles, so why would you get tax relief on this aspect of your income?

Savvy_Sue

phill99 wrote: »

Only against your self employment. I presume you don't use your tools in your employed roles, so why would you get tax relief on this aspect of your income?

Yes, but ...

IF in your first year of trading (possibly more) you continue to have income from employment,

THEN it is your TOTAL income and your TOTAL expenses which go into the pot as far as HMRC are concerned.

Very rough example:

income from employment £15,000 (probably taxed via PAYE)

income from self-employment £5,000

Total income £20,000 - and the £5,000 will be taxed at 20% because all your personal allowance has been used up in the PAYE job.

BUT expenses arising from the self-employment, eg

mileage to and from jobs £100

new tools £900

your income from self-employment is thus reduced by £1000.

Having said that, if these are tools you might equally use around the home, then you should apportion the use accordingly. So suppose you buy a new sooper-dooper drill for £100, which you expect to use 20% for personal use and 80% for work, then you should only claim £80 as a taxable expense.

Remember you'll need decent liability insurance, which is another taxable expense, and make sure your vehicle is properly covered. And if you're keeping a serious amount of professional tools at home, you'd want to make sure your home insurance and security is adequate.

00ec25

Savvy_Sue wrote: »

Yes, but ...

IF in your first year of trading (possibly more) you continue to have income from employment,

THEN it is your TOTAL income and your TOTAL expenses which go into the pot as far as HMRC are concerned.

nice try, but you have missed some technicalities:

you can offset losses made in self employment against employment income in the same tax year only if the self employment is calculated using the accruals basis

if done on the cash basis the offset can only be carried forward against profits in the same self employed business

https://www.litrg.org.uk/tax-guides/self-employment/working-out-profits-losses-and-capital-allowance/what-if-i-make-loss