self employed tax relief claim...

Louise__3

Hi all
i Am already employed part time and just starting to do some additional work self employed. I have to figure out whether to register as a sole trader or make myself a ltd company, but in the first instance I wanted to know if there is a minimum amount you would have to earn to be able to claim tax relief on essential items? 

My work is solely administration based and I therefore need to invest in a decent laptop. I don’t know how much I will earn self employed- it could be as little as £1500 for the year if I only work limited hours. 

In this instance, would I still be able to claim the cost of essential items needed to work (laptop £600), or is there a threshold you have to meet to be able to qualify for tax relief? 

Many thanks in advance 

soolin

Personally I would have a chat with an accountant as it isn’t as simple as writing off the cost of an asset against profits. You would need to write down costs based on depreciation for larger purchases like this. Otherwise think of the wonderful loophole that would be there to be abused- buy a Mac for £1000 , start selling online via an eBay account and show profits of £100 And show a £900 loss which could be offset against PAYE, it isn’t going to work. Everyone would be setting up as self employed every time they wanted to replace their expensive electrical items. 

oldbikebloke

no there is no threshold for start up business,

however.... if you are a sole trader:
for capital purchases you will need to justify the charge to the business based on % of use for purely business purposes. You then apply that to the capital charges rules and so take a proportion of the cost against your profits in year 1. Knowing this sort of stuff is why you may need an accountant, or to spend a lot more time than you have so far in your own research.

simple example: laptop £600. You state it is never, ever, for one nanosecond, used for non business purposes.
Therefore, claim for annual investment (capital) allowance: £600 x business use fraction (100%) = £600 cost against your 1,500 income = 900 taxable profit. 
Remember it is SELF assessment so you need to know what you are doing and HMRC will not look at every tax return from everyone, but if they do, they have clear ideas of business and personal use of most items, so will challenge you if you use an "unlikely" fraction. If then found to be wrong, expect to be penalised.

however....  if "you" are a Ltd Co, the position is rather different and the above example is not how it works..

the question Ltd v sole trader has been asked and answered gadzillion times - use google, plenty of webpages explain the factors one way or t'other

martindow

Will thid laptop be exclusively for business use or shared with your private use?  If the latter you will need to apportion a percentage of the cost.