Tax return - photographer, capital allowance Q

[pbv]

I'm hoping someone can help me, I've trawled the net for three hours and I'm still not finding the conclusive answer to what I'm looking for!

I started my part-time photography business as a sole trader on October 31st 2008 and understand that under the new Annual Investment Allowance I can claim 100% of £50,000 against my taxable income and that Wriding Down Allowances are on top of this at the rate of 20% (I'm staying laymans here so won't get into any special rates).

My question is I spent around £8,000 to set up (an amount I would class as made up of capital allowances - i.e. camera bodies, lenses, lights, flashguns, etc.). My income between Oct 31st and April 6th 2009 was around £700 with expenses being around £800. Here are my questions:

1. Am I able to spread the £8,000 set-up cost over consecutive years instead of declaring it in one lump sum (under AIA)?

2. Can I/Should I defer declaring any capital allowances for my "set-up" year and declare them for the 2009-2010 tax year instead? So just income and expenses for this year and that's it? (As the amounts are so small).

3. Is it worth getting an accountant at this stage or should I wait until the end of my first "proper year"?

I wasn't too sure whether you can spread the AIA cost and if so at what rate?

Thank you in advance for your help.

[elainec100@cheapaccounting]

1. Am I able to spread the £8,000 set-up cost over consecutive years instead of declaring it in one lump sum (under AIA)?

No - claim it and create a loss which can be used to offset against other income / carried forward etc. Don't know your circs and if all of the costs come under AIA - so can only give general advice on here.

Always worth speaking to an accountant - but I would say that :eek:

[pbv]

I fully intend to! :)

I work full-time and my income is just under £18,000, the photography sideline is more like pocket change (for the moment anyway). It would just be useful to know how loss is carried over and how that affects future taxable income (now I'm really showing my greeness!!)

Forgot to say thank you for the response by the way!

[CassioAcc]

If you make a loss in your self employment, you will be able to set this against your other income (ie employment earnings).

Remember that you can also defer any class 2 NI as you are paying class 1 in your employment.

[pbv]

I obtained a Class 2 Earnings Exemption form as soon as I started so I think that's all good but thanks for pointing that out. Not to sound stupid but can the loss be carried over within the self-employment instead of being offset against my current primary income. I'm not sure which would be more beneficial in the long run (if I have a choice that is!)

[frauke]

I obtained a Class 2 Earnings Exemption form as soon as I started so I think that's all good but thanks for pointing that out. Not to sound stupid but can the loss be carried over within the self-employment instead of being offset against my current primary income. I'm not sure which would be more beneficial in the long run (if I have a choice that is!)

Yes you can, and yes you do have the choice. It will be more beneficial if you think the tax rates will go up, or you become a higher rate tax payer later and if you think you will make a profit later. Or course if the rates drop, (!) then you will lose out or your future income drops, you could lose the benefit of getting the tax back against your current income .