Do I pay tax on my tools

[simon9163]

Hello i am a small start up business - my question is.
I have spent about £5000 on tools for my company. Are these tools taxable.
I have been told that my tools are included in my profit so i will need to pay tax on them, if this is the case how do i declare these on my spreadsheet.
thank you

 

[StevensOnln1]

Either you have misunderstood or the person who told you that has no idea what they are talking about. You certainly don't pay tax on tools (or any business purchases). Tools purchased for your business are allowable business expenses although high cost items would be claimed under capital allowances instead, although the overall amount of tax you pay would be the same.

 

[simon9163]

Thank you so much, that really has made my day. Do i just list the tooling as a deduction on my spreadsheet under tooling

 

[UK Contractor Accountant]

List it under tooling - your Accountant will decide when completing your year end Accounts whether to treat as capital or revenue item.

 

[Trader82]

Hi Simon,

You would record the purchase of your tools as an expense under tools or equipment.

So information needed for your spreadsheet would be:

Date of purchase
Description of goods
Amount
Ref (receipt no/supplier invoice no)

It's also a good idea to record how you paid for the goods, this is known as double entry bookkeeping.

If you used money from a business bank account say to pay for the tools you need to record this also.

 

[MyAccountantOnline]

Thank you so much, that really has made my day. Do i just list the tooling as a deduction on my spreadsheet under tooling

I really wouldnt use a spreadsheet for your company records - you really need something better which at least enables you to run a periodic profit and loss account to see how much you should be setting aside for tax and what dividends you can pay. If you dont want to pay for software take a look at VT cashbook.

Some of the tools may need to be included on the company balance sheet ask your accountant about that.

 

[Fackers]

To jump into this thread... Capital allowance, how do I state it on a spread sheet (for my purposes and accountants). So simply put my computer costs £500 the government will give me that back (if I don't make enough to cover the cost)?

 

[MyAccountantOnline]

To jump into this thread... Capital allowance, how do I state it on a spread sheet (for my purposes and accountants). ...

I'd ask your accountants how they want it presented if you are using a spreadsheet rather than accounting/bookkeeping software.

....So simply put my computer costs £500 the government will give me that back (if I don't make enough to cover the cost)?

No

If your accountants claim the £500 as capital allowances its another expense which reduces your taxable profit on which you pay tax.

 

[roydmoorian]

And of course the VAT on the purchase price of the tools would be reclaimed at the earliest opportunity. (Assuming VAT registration).

 

[Fackers]

Now I'm even more confused. I am so new to this and I'm yet to get an accountant, I was hopping to get most of it done myself. I prefer to understand it all before.

I have about £6k of equipment that I've bought in the last 2 years that is purely for the use of this business. So essentially I ask mr taxman to give me the money for these as 'capital allowance' to start my business. Then how does this affect how much I owe/receive.

Cheers for the help!

 

[Hash and Bash]

@Fackers - No the Government/taxman does not give you any money for your capital items!

You really need to get an accountant on-board asap, and/or do a lot of reading on the HMRC site.

 

[Ian J]

Now I'm even more confused. I am so new to this and I'm yet to get an accountant, I was hopping to get most of it done myself. I prefer to understand it all before.

I have about £6k of equipment that I've bought in the last 2 years that is purely for the use of this business. So essentially I ask mr taxman to give me the money for these as 'capital allowance' to start my business. Then how does this affect how much I owe/receive.

Not quite. Effectively the cost of the tools will be offset against the company's income which will then reduce your tax liability on profits

 

[Hash and Bash]

@Fackers - Are you operating as a sole trader or as a Limited company?

If you are a sole trader, are you doing your accounts on the 'cash basis'?

If you are on the 'cash basis' you normally just claim the tools as an expense which gets deducted from your sales to calculate your taxable profit.

 

[john1989]

You get tax relief on the cost. HMRC don't reimburse you the full cost!