New laptop as cost for my self-employment

the_learner

Hi, I currently have a contract with a company that pays me a daily rate through an umbrella company. Apart from this, I am running a subscription based service through my website that is going to generate about 2k of profit in a year. 
I already submit my self assessment every year and I know that I will have to register as self-employed and complete the corresponding section in the self assessment next time. 
But I have a question about costs. Am I allowed to buy a laptop online and use the corresponding cost to reduce the profit of my self-employment? Given the nature of my small business, I am wondering if it is reasonable to do that?  

Dazed_and_C0nfused

How much would the laptop cost and would you have any other expenses?

Pennywise

You can claim the proportion of the costs of the laptop according to how much you use it for the self employment, i.e. the subscription based service as against how much you use it for personal use (which includes your job through the umbrella, the usage of which cannot be set against a completely different trade).

So if you use it 1/3 for the subscription business, 1/3 for private/domestic use, and 1/3 for umbrella, you can claim a third of the costs.

the_learner

So laptop would cost about £700 and considering web hosting costs and few other items, I would have an extra £300/year in costs. As I am expecting to have about 2k in revenues from subscriptions that would leave about 1k in net profit.

I am not sure how to quantify how much I would use the laptop specifically for my self employment. If I say that I use this new laptop only for that activity, how could HMRC check that? 
 

Dazed_and_C0nfused

Would life be easier if you claimed the Trading Allowance instead?

Although this isn't an option if the self employment has any connection with your employer.

the_learner

Dazed_and_C0nfused said:

Would life be easier if you claimed the Trading Allowance instead?

Although this isn't an option if the self employment has any connection with your employer.

Yes, I guess if my total costs are below 1k then I would claim the trading allowance. But if I can deduct the cost of a new laptop I could deduct my costs instead.If I can deduct the full cost I could choose a better machine and my costs would be higher than 1k so making the trading allowance less convenient. 

uknick

Just to be clear, you're considering buying a laptop greater than £1k and will never make any personal use of it?  If HMRC were to check, albeit a slim chance, how would you be able to convince them of no personal use?

Pennywise

the_learner said:

So laptop would cost about £700 and considering web hosting costs and few other items, I would have an extra £300/year in costs. As I am expecting to have about 2k in revenues from subscriptions that would leave about 1k in net profit.

I am not sure how to quantify how much I would use the laptop specifically for my self employment. If I say that I use this new laptop only for that activity, how could HMRC check that? 
 

Obviously, they can't check how much time you spend doing each activity on your laptop.  BUT, there are other ways to check reasonableness of what you claim, if HMRC are so-minded.

For example, if it's your only laptop and you work from home for you main job, then it's obvious you're using it substantially for your main job.  Likewise if you're an intensive online gambler/gamer or whatever, it's obvious there's substantial private use.  Likewise if you only "need" a simple one for the subscription business, but buy a high end gaming machine, then again, it doesn't stack up if you say you only use it for the subscription business.

HMRC inspectors will look at the whole picture.  That is, as I say, should they be so-minded to check, which is very rare indeed.  What they expect, really, is taxpayers to be "reasonable" with their claims.  So if you say 50:50, they'd be more likely to rubber stamp it, than if you say 100% on what is clearly a small scale part time business (it's clear it's small scale part time by the relatively small income compared to costs and your tax return showing a much more substantial "wage" from what is clearly your main job).

I've certainly had an occasional tax enquiry where an inspector has queried a relatively high business claim proportion but then been easily satisfied by a reasonable explanation without having to provide evidence/proof.

the_learner

Thank you guys. I actually have a company laptop for my main job while the new laptop would be a mixed use between personal and website related activities. 
Given I would not buy anything more expensive than 1k, unless I claim 100% I would end up having total costs less than 1k (considering £300 of other costs). So say, I claim £700 for the laptop and £300 for the other costs, I would just breakeven with the trading allowance of 1k. So I am indeed better off just claiming the trading allowance in my case, unless I could safely claim 100% of the cost of a 1k+ laptop.

Grumpy_chap

the_learner said:

I would just breakeven with the trading allowance of 1k. So I am indeed better off just claiming the trading allowance in my case, unless I could safely claim 100% of the cost of a 1k+ laptop.

The other benefit is that the trading allowance is a flat scheme and not open to be challenged in the same way that a laptop could be.

[Deleted User]

the_learner said:

Thank you guys. I actually have a company laptop for my main job while the new laptop would be a mixed use between personal and website related activities. 
Given I would not buy anything more expensive than 1k, unless I claim 100% I would end up having total costs less than 1k (considering £300 of other costs). So say, I claim £700 for the laptop and £300 for the other costs, I would just breakeven with the trading allowance of 1k. So I am indeed better off just claiming the trading allowance in my case, unless I could safely claim 100% of the cost of a 1k+ laptop.

You have the option of claiming £1000 trading allowance ( no questions asked and no receipts required) or actual expenses. In your situation there appears to be one heavily favoured option.