Tax

[garethEds]

Any experts on here regarding tax?

 

As most know I am a teacher and am happy to earn what I do. I pay the 40% rate of tax for earnings over £34,371.

 

AmI right in saying that people who work can write expenses against their tax return? So if I was to be paid for a piece of work (freelance consultant - £1500) and bought a 27" iMac out of that could I avoid paying tax on it instead of giving 40% of it to the taxman?

 

Did that make sense? I'm sure my builder friend has income and expenses which the accountant plays off against each other.

 

Or am I totally wrong - which is why I need an expert :-)

 

Gareth

Edited December 3, 2012 by garethedmondson
changed wording

[twin--turbo]

If you have self employed earnings then yes you can offset business expenses against tax, howver given the lifespan of a mac you would probably claim it over a 5 year period.

 

on your self assesment you would fill in your earnings from employment, earnings from self employment and expenses incured in the course of your business.

 

Rob

[elsiegee40]

You can claim tax against items necessary for your job such as uniform that you MUST wear to do it. But computer equipment is a grey area. If you were VAT registered you could reclaim the VAT, but I doubt you would be able to offset it against income tax.

 

My accountant husband is on the wrong continent at present, so I cannot confirm. Given that he's never pulled that one off for me, I assume it doesn't work

[twin--turbo]

You can claim tax against items necessary for your job such as uniform that you MUST wear to do it. But computer equipment is a grey area. If you were VAT registered you could reclaim the VAT, but I doubt you would be able to offset it against income tax.

 

My accountant husband is on the wrong continent at present, so I cannot confirm. Given that he's never pulled that one off for me, I assume it doesn't work

 

 

If your doing it by the book then you need to quantify the amount of use for personal gain and for business use.

 

you can do the same with household expenses if using your home as an office..

 

Rob

[elsiegee40]

The thing is that Gareth is a teacher, not self-employed. If this worked I'm sure the unions would be spreading the good news and HMRC hurrying to close loopholes.

 

You do need your own business Gareth.

[twin--turbo]

The thing is that Gareth is a teacher, not self-employed. If this worked I'm sure the unions would be spreading the good news and HMRC hurrying to close loopholes.

 

You do need your own business Gareth.

 

Hes's done a job for £1,500 ,

 

he's either self employed or avoiding tax.

 

You can be employed and self employed at the same time.

 

Rob

[CyberNerd]

AmI right in saying that people who work can write expenses against their tax return? So if I was to be paid for a piece of work (freelance consultant - £1500) and bought a 27" iMac out of that could I avoid paying tax on it instead of giving 40% of it to the taxman?

 

Yes you can do this, I did it after getting advice from an accountant. You must first make a declaration to HMRC that you are working self employed alongside your regular income. If you don't plan on making much (less than £5500 p/a) you won't need to make NI contributions on this. In the first year it is more generous for buying tools such as laptops. After your set up with HMRC you'll need to file a tax return each year and you can claim the tax back on the laptop, along with a proportion of your phone bill, a driving allowance to get to jobs, hotel accommodation for trade fairs etc.

[elsiegee40]

Like I said, it's not straightforward. I'll talk to my accountant when he's next online.

[twin--turbo]

He will pay 40% tax on £1,500 so get a take home of £900 and have to pay Class 2 NIC.

 

Rob

[twin--turbo]

Like I said, it's not straightforward. I'll talk to my accountant when he's next online.

 

 

HMRC website has reasonably good information to follow for the self employed.

 

 

At the end of the day though the Self Assessment is !!Self Assesment!! as long as it is reasonable it won't get questioned.

 

Rob

[CyberNerd]

Yes you can do this, I did it after getting advice from an accountant. You must first make a declaration to HMRC that you are working self employed alongside your regular income. If you don't plan on making much (less than £5500 p/a) you won't need to make NI contributions on this. In the first year it is more generous for buying tools such as laptops. After your set up with HMRC you'll need to file a tax return each year and you can claim the tax back on the laptop, along with a proportion of your phone bill, a driving allowance to get to jobs, hotel accommodation for trade fairs etc.

 

Just a caveat on this: If your just doing one job and that's it then forget about it. The Inland Revenue aren't entirely stupid and if your self employed earnings are just £1500 and you spend it all on a laptop and not give them any tax they won't look so favorably on it. If you buy say a £500 laptop on £1500k earnings it is going to look a bit more reasonable.

 

I think I paid about £300 tax on about £3k earnings in my first year.

[featured_spectre]

The mrs deals with tax and the HMRC day in day out as part of her job.

 

The iMac would solely have to be used as a business computer (this includes no facebook, twitter, personal emails and such like). She has seen people where they bring in say £4000 as a self employed person, claim around £2500 as business expenses and pay tax on the rest, and the HMRC seized the equipment which was claimed to be used as a business only, in the case above it was a Computer (a high end machine), and seen personal usage on it such as PC games, social networking etc. As such HMRC seized the machine and auctioned it off as payment for the tax which was avoided plus the fine levied for tax avoidance.

 

If you bought in say £15'000 and spent £1'500 on the machine, they'd probably leave it, but if you bring in £1'500 and spent the entire amount, they'd most likely investigate fully, which can lead to your wages being frozen in your bank (never pleasant).

 

This comes from my mrs who works very closely with the HMRC.

Edited December 3, 2012 by featured_spectre

[twin--turbo]

I think I paid about £300 tax on about £3k earnings in my first year.

 

As he is taking home over 34K all of his self employed earnings are taxable at 40% ( less expenses )

 

Rob

[CyberNerd]

As he is taking home over 34K all of his self employed earnings are taxable at 40% ( less expenses )

 

Rob

 

yeah - I was working as well, but I payed about 10% on the money that I earned self employed. If I wasn't working an I earned £3000 per year I'd a) be on the streets b) not pay any tax at all.

[FragglePete]

He will pay 40% tax on £1,500 so get a take home of £900 and have to pay Class 2 NIC.

 

Rob

 

If your 'self employed' income is less than a certain amount (I think it's in the region of £4k per year), you don't have to pay Class 2 NIC on that amount. You do have to declare this and get an exemption from your Tax Office (sort of certificate). It's what I have in place for my side line business.

 

I've been working as a 'sole trader' alongside my main job at the School, I've been doing tax returns now for about 5 years or so now; for general PC work, web work, etc. Nothing serious, but a bit of pocket money. You have essentially Business Expenses and Capital Expenses. Business expenses is things like paying my hostage costs which I mark up and charge out to customers (this is the profit element that is taxable). Capital expenses are things like equipment you need to do the job, but as mentioned if used for personal use also then you need to work out a percentage of it, and larger items should be done over a number of years. Sames as business expenses, you can claim a certain percentage for things like your mobile phone, broadband, electricity, etc - I only put mine down as around 10% as it's used primarily for home use.

 

However, you don't need to itemise it if below a certain amount (it's quite a large amount I believe), but it's the main figures that there interested in, Turnover - (Business + Capital Expenses) = Profit and that's what your taxed against. If the tax owed is less than £2k per year, the tax office will more than likely just adjust your PAYE code with your employer so you pay it off over the next year (that's what happens to me anyway). To be honest, I don't make much, anything between £1.5k to £2k per year, so it's a tiny amount (going to be even worse this year as people just spending money at the moment) - but, it's a bit of extra pocket money.

 

Pete

[dhicks]

If your 'self employed' income is less than a certain amount (I think it's in the region of £4k per year), you don't have to pay Class 2 NIC on that amount.

 

Informative, thanks...

 

Business expenses is things like paying my hostage costs

 

...although I must remember never to accept an invitation to "come and look round" your basement...

[Greenbeast]

This thread has reminded me, need to apply for class 2 NI exemption this year on my blacksmithing. no way will i meet the threshold!