Buying a laptop as a work expense

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Trevstonbury_2
Trevstonbury_2 Posts: 21 Forumite
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in Cutting tax
Good Afternoon,

I have recently set myself up as a self employed Computer Engineer so am still getting to grips with expenses etc.

I am looking to buy a laptop purely for work purposes and will be retaining my current one for personal use. I am looking to spend around £800inc VAT and wanted to advice on the following;

If I put this down as an expense how much will my tax be deducted by spending this amount?

Does it make a different if I pay for the laptop monthly or pay for it all in one go?

FYI - I registered as self employed in June 2017

Any advice would be much appreciated, really looking to ensure that I make the most back on purchasing the item.

Kind regards

Trevor Jones
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  • TheCyclingProgrammer
    TheCyclingProgrammer Posts: 3,702 Forumite
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    Your tax saving will depend on your marginal rate of tax. If you’re a basic rate payer you will save £160 in tax on an £800 purchase. You may also save some class 4 NIC depending on your profit level.
  • Trevstonbury_2
    Trevstonbury_2 Posts: 21 Forumite
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    Thank you for the quick response. Does it make a difference on the payment schedule i.e. monthly payment vs one payment?
  • dori2o
    dori2o Posts: 8,150 Forumite
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    Trevstonbury wrote: »
    Thank you for the quick response. Does it make a difference on the payment schedule i.e. monthly payment vs one payment?

    No.

    For expenses such as this the way you pay for the item has no bearing on the value of the expense claimed.

    Just like with credit card purchases, the item is deemed as paid for with the retailer, therefore you claim the purchase price in full as an expense.
    [SIZE=-1]To equate judgement and wisdom with occupation is at best . . . insulting.
    [/SIZE]
  • Pennywise
    Pennywise Posts: 13,468 Forumite
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    Trevstonbury wrote: »
    Thank you for the quick response. Does it make a difference on the payment schedule i.e. monthly payment vs one payment?

    Depends whether you adopt cash accounting.
  • dori2o
    dori2o Posts: 8,150 Forumite
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    Pennywise wrote: »
    Depends whether you adopt cash accounting.

    For interest charges on loans I would agree, but even with cash basis, for expenses such as this where the item is an allowable expense and is wholly exclusively bought for the business the information given to taxpayers would be to include the expense based on the transaction date and not calculated based on the finance payments.

    Just reviewed the BIM again and there's not much in there relating to this (which is typical and rather unhelpful) . But the guidance we've always given for tools/equipment etc where a cash loan/cash borrowing isnt used and its purchased via credit card/trade account/hp is to use the purchase date rather than individual payment dates.

    The only time it would be different is if bank loan was used. In this instance I agree the cash basis makes a difference, especially with regards to maximum interest charges

    Its a common question that comes up and this is the advice always given and I've checked it a few times previously.
    [SIZE=-1]To equate judgement and wisdom with occupation is at best . . . insulting.
    [/SIZE]
  • Pennywise
    Pennywise Posts: 13,468 Forumite
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    "Only count the expenses you’ve actually paid. Money you owe isn’t counted until you pay it."

    As per HMRC webpage https://www.gov.uk/simpler-income-tax-cash-basis/income-and-expenses-under-cash-basis

    Seems pretty clear to me.
  • dori2o
    dori2o Posts: 8,150 Forumite
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    I see what you are saying, and the guidance is vague at best, but in this case, for things like a laptop on a finance agreement or paid via credit card (which would be my preferred option in this case given the added protection given) , the item is deemed as paid for with the retailer, even if a balance is outstanding on the credit agreement. Therefore the expense can be claimed in full.

    What the guidance you have quoted is saying is that you cant pre-empt an expenses claim. i. e. A builder can't claim for a hammer he's going to buy in 6 months time after the accounting period has ended the purchase of the item has to have been made within the accounting period.

    This is the same for any credit agreement other than bank loans., whether it be a credit card, a finance agreement, trade account etc.

    I deal with loads of capital allowance/AIA claims (mainly for mechanics) who have credit agreements with the likes of Snap On Tools, and when they send in their invoices there are often outstanding balances on the agreement, but as long as the purchase/transaction date is within the relevant accounting period the expense is allowable, even if the item has not been paid for in full.

    I'm not saying you cannot do it the other way, but its not compulsary to do it that way.
    [SIZE=-1]To equate judgement and wisdom with occupation is at best . . . insulting.
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  • Pennywise
    Pennywise Posts: 13,468 Forumite
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    dori2o wrote: »
    I'm not saying you cannot do it the other way, but its not compulsary to do it that way.

    But, what you're saying is what's known as the "accruals" concept, where costs are brought in as they are incurred, rather than the physical payment. That's how it always used to be and how it continues if you don't opt into the cash basis.

    Under the cash basis, the whole point is simplification is that your returns are on the simple basis of money in less money out as per the webpage I quoted.

    You opt to choose one or the other, and then you have to be consistent. You can't "choose" to ignore sales invoices you've not be paid for yet under the cash basis, but "choose" to include expenses you've incurred or goods you've bought, but not yet paid for.
    dori2o wrote: »
    I deal with loads of capital allowance/AIA claims (mainly for mechanics) who have credit agreements with the likes of Snap On Tools, and when they send in their invoices there are often outstanding balances on the agreement, but as long as the purchase/transaction date is within the relevant accounting period the expense is allowable, even if the item has not been paid for in full.

    If the taxpayer has opted for the cash basis, then that is wrong.
  • Pennywise
    Pennywise Posts: 13,468 Forumite
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    https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim70067

    "In the cash basis period, the instalments will be deducted when paid."
  • RNeutron
    RNeutron Posts: 6 Forumite
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    @Pennywise, does that apply also if the purchase was through personal finance. For example I bought a PC from a seller that provided finance through a third party lender. In that case, do I only claim what I paid toward that finance during the year or would I claim the whole purchase amount?
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