Question about making a loss in tax year for self employed

[ajax_andy 0]

Just a quick question due to my recently registering as self employed for my photography business.

 

Now due to the fact I've spent about £2k on equipment over the last year or so I was wondering how this impacts on me paying tax.

 

Say I earned (I haven't this is just to make the figures easy) £1,000 I should be due to pay tax of £20% i.e. £200. However the cost of setting up the business far outweighs this, so it could be argued that in fact I've actually made a loss of £1000 for example.

 

Does this mean I can get out of paying the £200 example tax?

 

And if so can I then carry the remaining £1000 "Loss" over to the next tax year and so on and so forth?

 

If all this is possible how would I show that I have spent the money on equipment? I can produce bank statements, ebay / amazon / electronic shop statements... however as most was bought on line I'm lacking in receipts... would I need to contact the sellers and get invoices? Some was bought 2nd hand so this isn't always going to be possible.

[Gejon 2]

You don't start paying text until you are something like £6k in profit.

[JoCo85 0]

Depends, If you can prove these purchase are indeed for your business, you can include it. The HMRC don't usually come knocking for it and you don't have to include dates/breakdowns on the tax return. But if they do come knocking, its good to have proof. The statements from amazon should probably suffice.

 

As long as you can justify the loss you can carry it forward against trading profits (has to be the same trade).

 

In regards to the tax on profit, it depends if you have employment income as well as your self employed income.

[ajax_andy 0]

Depends, If you can prove these purchase are indeed for your business, you can include it. The HMRC don't usually come knocking for it and you don't have to include dates/breakdowns on the tax return. But if they do come knocking, its good to have proof. The statements from amazon should probably suffice.

 

As long as you can justify the loss you can carry it forward against trading profits (has to be the same trade).

 

In regards to the tax on profit, it depends if you have employment income as well as your self employed income.

 

Thanks mate that's very helpful... Yeah all purchases are camera equipment and the like so it's all very much related to any money that I have made.

 

I've never filled in a tax return before but I'm guessing there's something on there where I note all this down, or do I need a seperate form?

 

I work full time so pay tax through my employer, however I understand the self employed side of things is seperate so doesn't impact on the money made through my photography?

[JawD 99]

Also a camera wouldnt be wrote off or would you take it as a straight operation cost? If you bought a camera I'd imagine it would be an asset that would depreciate? Im not sure how it works for self employed. Maybe the account guru's on here know.

[ajax_andy 0]

Also a camera wouldnt be wrote off or would you take it as a straight operation cost? If you bought a camera I'd imagine it would be an asset that would depreciate? Im not sure how it works for self employed. Maybe the account guru's on here know.

 

haha fucked if I know mate... all very new to me!

 

I'd imagine it'd just be a one off operational cost but I might be wrong. Tbh I bought it for £320 and they seem to be going for more than that on ebay at the mo so technically its appreciated if that's the correct word lol

[Ruler of Planet Houston 1]

Yes. Anything you spend on your business such as cameras, batteries, lenses etc... will be deducted from your profit and you are only taxed on the remainder. However, there are loads of other deductions that can (and should) be made such as use of home as office, phone, internet, mileage allowance etc..

 

You'd be best off getting an accountant to sort it out for you as they know all sorts of ways to get the best out of your situation each year - something on the side like that shouldn't really cost you more than £150 from a decent accountant I would think. When I was employed and earning on the side at the same time, I always ended up with a rebate which was a nice surprise. If I had did my own accounts I would have probably paid tax instead.

[Ruler of Planet Houston 1]

Also a camera wouldnt be wrote off or would you take it as a straight operation cost? If you bought a camera I'd imagine it would be an asset that would depreciate? Im not sure how it works for self employed. Maybe the account guru's on here know.

 

I think that you can write off 100% if you need to but if you carry any cost over to the next year you can only deduct 20% per year every year until it's all gone.

[JoCo85 0]

Also a camera wouldnt be wrote off or would you take it as a straight operation cost? If you bought a camera I'd imagine it would be an asset that would depreciate? Im not sure how it works for self employed. Maybe the account guru's on here know.

 

I think that you can write off 100% if you need to but if you carry any cost over to the next year you can only deduct 20% per year every year until it's all gone.

 

Yeah, you can, it's AIA allowance... you get to write 100% of them off. There's no point capitalising items and depreciating it unless you are trying to compare operational/running cost (management account) as it is not tax deductable, it is more for performance management analysis.

 

There are supplement tax forms for the self employed section, but the 'analysis' or 'breakdown of expenses' doesn't need to be filled out if turnover is under a certain threshold (can't remember without looking it up, but is something like £80,000) so I presume you are safe here.

 

RPH is right about the other estimates as well that could be put in to further write down profit, providing they are justifyable.

[ajax_andy 0]

Yes. Anything you spend on your business such as cameras, batteries, lenses etc... will be deducted from your profit and you are only taxed on the remainder. However, there are loads of other deductions that can (and should) be made such as use of home as office, phone, internet, mileage allowance etc..

 

You'd be best off getting an accountant to sort it out for you as they know all sorts of ways to get the best out of your situation each year - something on the side like that shouldn't really cost you more than £150 from a decent accountant I would think. When I was employed and earning on the side at the same time, I always ended up with a rebate which was a nice surprise. If I had did my own accounts I would have probably paid tax instead.

 

Cheers for the info mate... tbh I'm so far away from making a profit that I haven't bothered counting mileage, internet etc but will do once I'm getting a bit more work and money in... or rather charging more for my services as quite busy at the mo but i'm not charging a lot so can build up experience and rep.

 

I really couldn't afford an accountant at the moment... its something I'd consider in the future though... I just need to find one who is willing to do it in exchange for a family photoshoot or something lol.

 

It sounds like I can just keep rolling it over though from what you said? that is good as I will still keep buying equipment with any money I make so will be a while yet before I will be turning over a profit and it's good to know that I wont be paying tax as well on top of this until I'm making a clear profit

[donaldstott 0]

Any earnings under £15k normally doesn't require receipts etc.

 

I'd claim it as a business expense, declare a loss, photocopy your form and submit the same numbers next year!

[Toonraider 0]

In our first year our accontant put all the tools/benches in we'd bought, and using home as an office and so on. We paid £7 tax that year!!!

[ewerk 31589]

I'm not certain on sole trader tax but in company tax you can bring losses forward so even if you don't turn a profit this year it can be beneficial to maximise your losses for future tax periods.

[ajax_andy 0]

I'm not certain on sole trader tax but in company tax you can bring losses forward so even if you don't turn a profit this year it can be beneficial to maximise your losses for future tax periods.

 

Yeah that's what I was hoping tbh... I dont plan on paying any tax unless I have too, so spending what i earn on new equipment and carrying losses over is the only way I'll be able to grow as a business - equipment is very expensive and I dont earn enough in the day job to fund it forever.

[Ruler of Planet Houston 1]

That's sort of what I meant which is why an accountant would be worth the money. For example, if you spend £2000 and only made a taxable profit of £1000 over your allowance, an accountant would deduct the £1000 to give you a tax bill of £0 and carry the other £1000 over for future years. But next year you would only be able to claim 20% of that £1000 as an offset against your profit and it would take 5 years to totally use up that outgoing. That's just where it starts getting complicated and where you might think £150 ( it might be less than that even) is too much to spend on an accountant, you may very well lose more than that by doing a bad job of your accounts yourself. A typical mistake would have been to have declared the full £2000 outgoing and still got a bill of £0, but couldn't use that extra £1000 for following years.

 

As I said, if I did my own accounts for the last 13 years I would have probably lost tens of £thousands by doing it wrong.

Edited November 10, 2011 by Ruler of Planet Houston

[Gemmill 47074]

Seriously, get an accountant. They don't cost that much, and they'll more than pay for themselves.

 

I am an accountant, but I'm a shit one and I wouldn't have a clue about all the tax rules. But a good one will be well worth whatever it costs you. I would at least talk to one about the sort of things they could do for you and how much it would cost.

 

My stepdad runs his own business and they use a local accountant. I'll get the name for you if you want, cos they're pretty happy with this bloke. The last one they had was hopeless, so it's important to get someone decent.

[ajax_andy 0]

Seriously, get an accountant. They don't cost that much, and they'll more than pay for themselves.

 

I am an accountant, but I'm a shit one and I wouldn't have a clue about all the tax rules. But a good one will be well worth whatever it costs you. I would at least talk to one about the sort of things they could do for you and how much it would cost.

 

My stepdad runs his own business and they use a local accountant. I'll get the name for you if you want, cos they're pretty happy with this bloke. The last one they had was hopeless, so it's important to get someone decent.

 

Yeah that would be good mate thanks

[Toonraider 0]

Seriously, get an accountant. They don't cost that much, and they'll more than pay for themselves.

 

I am an accountant, but I'm a shit one and I wouldn't have a clue about all the tax rules. But a good one will be well worth whatever it costs you. I would at least talk to one about the sort of things they could do for you and how much it would cost.

 

My stepdad runs his own business and they use a local accountant. I'll get the name for you if you want, cos they're pretty happy with this bloke. The last one they had was hopeless, so it's important to get someone decent.

 

Yeah that would be good mate thanks

 

I definitely agree with Gem, we don't know enough about it all to do our tax ourselves. Our accountant costs around £400-£500 a year.(She is a friend of ours but works for a firm, so she has to charge the 'proper' rate) But she must save us more than that.

[Gemmill 47074]

No bother andy, have asked the question and will pass on the answer when I hear back...

[Gemmill 47074]

Reset, have sent you that info by PM.

[Barney 0]

Fucks sake, Gemmill is involved. The man who suggested backing Souness with unlimited amounts of cash until explosion.

[Gejon 2]

The know it all accountant who got an education.

 

Scum as far as I'm concerned.

Edited November 11, 2011 by Gejon

[manc-mag 1]

[Barney 0]

 

 

And here comes the grey-man.

 

 

Right on-time(4 years late).

Edited November 11, 2011 by Barney

[Gejon 2]

The man who has no opinion but somehow managed to be wrong 4 years ago whilst insisting, yet still having no opinion, that Ashley was better than Shepherd.

 

Also scum iyam.