Offsetting Sole Trader Loss Against PAYE
Comments
-
Opening year rules don’t allow you to pick your tax period, it runs from commencement to following 5 April
Having read the thread suggested by Purdyoaten, it seems that the quote above that you're unable to choose your tax period is incorrect, and that there is indeed some latitude for a new sole trader business to select an accounting period other than 5th/4th.0 -
Having read the thread suggested by Purdyoaten, it seems that the quote above that you're unable to choose your tax period is incorrect, and that there is indeed some latitude for a new sole trader business to select an accounting period other than 5th/4th.
Perhaps you need to find out the difference between an accounting period and tax period.....two very different things in this context0 -
This may be the theory - but I've recently noted HMRC adding the (magnitude of the) SE loss claimed to the Personal Allowance.
Anyone else noticed this bizarre behaviour?0 -
Having read the thread suggested by Purdyoaten, it seems that the quote above that you're unable to choose your tax period is incorrect, and that there is indeed some latitude for a new sole trader business to select an accounting period other than 5th/4th.
It’s definitely correct. You can prepare accounts to whatever period you like but the period assessed to tax is determined by specific legislation.0 -
It’s definitely correct. You can prepare accounts to whatever period you like but the period assessed to tax is determined by specific legislation.
Correct, i.e. if you choose your first "accounting year" to be 1/6/18 to 31/5/19, your 18/19 tax return will declare 10/12ths of the profit/loss.
Or if you choose a year end of 31 Dec, the 18/19 return will declare all the profit/loss for the period 1/6/18 to 31/12/18 and then 3/12ths of the profit/loss for the subsequent year end 31/12/19.
This can be exceptionally handy and useful depending on the actual dates/timing of capital expenditure, sales, start up costs, etc. You can actually create a loss by shortening the first "year" or reduce a loss/create a profit by lengthening the first "year".0 -
Correct, i.e. if you choose your first "accounting year" to be 1/6/18 to 31/5/19, your 18/19 tax return will declare 10/12ths of the profit/loss.
Or if you choose a year end of 31 Dec, the 18/19 return will declare all the profit/loss for the period 1/6/18 to 31/12/18 and then 3/12ths of the profit/loss for the subsequent year end 31/12/19.
This can be exceptionally handy and useful depending on the actual dates/timing of capital expenditure, sales, start up costs, etc. You can actually create a loss by shortening the first "year" or reduce a loss/create a profit by lengthening the first "year".
Yes but ( and I know that you are aware of this) one needs to be very careful. The loss, in your example, for the six month period ended would still all relate to 2018/19. This may not be the most advantageous.
Again using your example let's say that we have a loss for the period 1st June 2018 to 31st December 2018 of £15000. The year to 31st December 2019 shows a profit of £30000.
If we prepare one set of accounts to 31st December 2018 (seven months) the 2018/19 tax return will include Loss £15000 plus 3/12 of Profit £30000 - resulting in a tax year loss of £7500 which may or may not be relievable.
2019/20 will be based on £30000 (There will be overlap profits)
However if only one set of accounts is prepared for the whole period from 1st June 2018 to 31st December 2019 (19 months) we have the following:
2018/19 10/19 by £15000 (£30000 less loss £15000) = £7894
2019/20 - 12/19 by £15000 = £9473
Overlap profits will also arise.
One would need to look at the individual circumstances of course e.g. loss is fully relieved in the second scenario and no tax to pay in either year.
In the first example there could be a needless tax bill for 2019/20 on £30000 profits.
The problem is, of course, that one doesn't know in advance what the profits for 2019/20 will be until well after the date for filing the 2018/19 tax return.
All part of tax planning.0 -
[quote=[Deleted User];76269795]The problem is, of course, that one doesn't know in advance what the profits for 2019/20 will be until well after the date for filing the 2018/19 tax return.
All part of tax planning.[/QUOTE]
Absolutely agree, but that's where having good book-keeping is worth it's weight in gold, as that means you have accurate figures as each month passes, not only to show what profit/loss is made to date, but also makes is easier to project forward to the missing months.0
This discussion has been closed.
Categories
- All Categories
- 343.1K Banking & Borrowing
- 250.1K Reduce Debt & Boost Income
- 449.7K Spending & Discounts
- 235.2K Work, Benefits & Business
- 607.8K Mortgages, Homes & Bills
- 173K Life & Family
- 247.8K Travel & Transport
- 1.5M Hobbies & Leisure
- 15.9K Discuss & Feedback
- 15.1K Coronavirus Support Boards