Allowable Costs for Self Assessment

MoneySaver16

Thanks again - this is really helpful. The “what happens next” angle is one that is interesting.

Using an example of hi-fi equipment - so I could buy various speakers, amps, players etc and then review. Costs are deductible. If sold on post-review the proceeds are included as revenue. Seems fair.

The products would get some wear and tear in use but they would usually hold value of approx 30-60% depending on spec of the items.

To confuse things what I don’t resell them straight away but keep them for future longer term review updates, comparisons, etc.? I think in that scenario it is likely fair to deduct the whole cost then tax the revenue when/if sold as the items are adding value to the business by being in comparison pieces, photos etc.

I am also wondering if some kind of giveaway of products post-review (periodically) would be a good way to grow and keep engagement in an email list. These people would then be interested in the reviews/products and hopefully generate future commission. Again this would seem deductible as a cost of that particular marketing angle I would think, but happy to be corrected?

As sad as it is I have found the business side of this and tax etc quite fascinating! Appreciate any and all thoughts.

Jeremy535897

What you will have is two parts to your business:

• income from the reviewing of products
• income from the disposal of products

The income generated from the review (commission, advertising etc) is taxable as you would expect. The product side is more like a shop, albeit a loss making one. When a shop prepares traditional accounts, it makes a gross profit on the difference between what it sells and what those sales cost. Suppose you buy 10 items at £100 each. You sell 6 at £60 each, keep two (worth £70 each say) and still have two. Your gross loss would be calculated as follows:
Receipts from sales and value of items taken for personal use £360 + £140 = £500
Cost of items sold 8 at £100 each =£800. Loss £300. You still have stock remaining of two items. (If you use the cash basis of accounting, you can simplify things, but there are disadvantages too.)

You will also have the usual costs for self employed people. See
https://www.gov.uk/expenses-if-youre-self-employed

Pennywise

MoneySaver16 said:

Thanks again - this is really helpful. The “what happens next” angle is one that is interesting.

Using an example of hi-fi equipment - so I could buy various speakers, amps, players etc and then review. Costs are deductible. If sold on post-review the proceeds are included as revenue. Seems fair.

The products would get some wear and tear in use but they would usually hold value of approx 30-60% depending on spec of the items.

To confuse things what I don’t resell them straight away but keep them for future longer term review updates, comparisons, etc.? I think in that scenario it is likely fair to deduct the whole cost then tax the revenue when/if sold as the items are adding value to the business by being in comparison pieces, photos etc.

I am also wondering if some kind of giveaway of products post-review (periodically) would be a good way to grow and keep engagement in an email list. These people would then be interested in the reviews/products and hopefully generate future commission. Again this would seem deductible as a cost of that particular marketing angle I would think, but happy to be corrected?

As sad as it is I have found the business side of this and tax etc quite fascinating! Appreciate any and all thoughts.

You also have to account for private use/enjoyment whilst you own them, usually via add back according to respective usage, i.e. if you use something for say 50 hours for legitimate business review, and then use it for 50 hours for private enjoyment after you've published your review, then a 50% disallowance may be required so you only claim half the cost.

Jeremy535897

Pennywise said:

MoneySaver16 said:

Thanks again - this is really helpful. The “what happens next” angle is one that is interesting.

Using an example of hi-fi equipment - so I could buy various speakers, amps, players etc and then review. Costs are deductible. If sold on post-review the proceeds are included as revenue. Seems fair.

The products would get some wear and tear in use but they would usually hold value of approx 30-60% depending on spec of the items.

To confuse things what I don’t resell them straight away but keep them for future longer term review updates, comparisons, etc.? I think in that scenario it is likely fair to deduct the whole cost then tax the revenue when/if sold as the items are adding value to the business by being in comparison pieces, photos etc.

I am also wondering if some kind of giveaway of products post-review (periodically) would be a good way to grow and keep engagement in an email list. These people would then be interested in the reviews/products and hopefully generate future commission. Again this would seem deductible as a cost of that particular marketing angle I would think, but happy to be corrected?

As sad as it is I have found the business side of this and tax etc quite fascinating! Appreciate any and all thoughts.

You also have to account for private use/enjoyment whilst you own them, usually via add back according to respective usage, i.e. if you use something for say 50 hours for legitimate business review, and then use it for 50 hours for private enjoyment after you've published your review, then a 50% disallowance may be required so you only claim half the cost.

I think the better view in such circumstances is to treat the item as sold at market value at the point it is no longer needed for the review, as I outline above. If there is some incidental element of personal enjoyment during the review process, that would normally be ignored.

MoneySaver16

Thanks again - I am assuming the advice would carry to fixed assets as well? For example IT equipment which is used for business could be apportioned based on relative % use business vs personal? 

I’ve developed the sites predominantly on an iPad (writing mainly), but using an old laptop for the bits and pieces that need a full operating system (some specific applications are desktop only). Unfortunately the laptop has a swollen battery and no longer functions fully, so I was considering replacing with a cheap machine for predominantly business use.

Jeremy535897

If you buy plant and machinery for use in your self employed business, you can claim the annual investment allowance of 100% on the business proportion of the cost in the year of purchase. If you use the cash basis, claim the same amount as an expense.

MoneySaver16

Thanks Jeremy - you have been very helpful Really gone above and beyond to help - and made this as clear as I think is possible for it to be!

Srkane27

Hi there 
I was wondering if someone on here could help or post me on the right direction. I’m currently employed full time and in the higher tax bracket! An opportunity has arisen and could have a sideline business opportunity. My question is if I earn less £1000 am I right in saying I don’t need to disclose this to HMRC? Or is this not correct? 

Thanks 

Jeremy535897

Srkane27 said:

Hi there 
I was wondering if someone on here could help or post me on the right direction. I’m currently employed full time and in the higher tax bracket! An opportunity has arisen and could have a sideline business opportunity. My question is if I earn less £1000 am I right in saying I don’t need to disclose this to HMRC? Or is this not correct? 

Thanks 

In future, please start your own thread. You can receive gross income, before deducting any costs, from self employment of up to £1,000 in a tax year without having to declare it.