First time expenses claim - large purchase

[nightofjoy]

Hi.

I'm a Graphic Designer, working from home.

My old 2007 Mac is dying on it's arse and desperately needs replacing.

I believe this is the kind of thing I can claim back on my taxes?

I've never claimed any work expenses before - I don't really have anything to claim for. You don't really print anything out when you work from home, so you don't get through any inks, and all of my hardware has been running ok up until the last 12 months when my computer has really started to struggle.

I don't earn a great deal, I usually only pay around £2k - 2.5k in tax per year, so forking out £1,500 on a new mac is a massive amount of cash to lay out, so I'm wondering, after I've saved enough to make the purchase, when is the best time to buy so I get the money back or taken off my tax return as soon as possible?

I had a zero return for 20-21 because Covid lockdowns meant I earned nothing for the previous tax year. I received the government self employment grants, but they came in below the tax threshold so there was nothing to pay. I'll be starting afresh when it's time for the 21-22 return.

Thanks.

 

[Anna Chandley]

Its not clear from your post whether you think your tax bill will be reduced by the whole purchase cost of the computer ie if tax bill would have been £2.5k without spending £1.5k on new computer it becomes £1k tax payable.

This is not the case. The purchase cost will reduce the taxable profits on which you pay tax by £1.5k. so would reduce the tax payable by a maximum of £300 for a basic rate tax payer plus potentially a small reduction in class 4 NI.

 

[StevensOnln1]

You would claim the £1,500 as Annual Investment Allowance (AIA) in the tax year that you buy the new computer. That will reduce your profits by the amount claimed, it won't take £1,500 off your tax bill.

Don't forget that you can claim a weekly allowance for working from home in your business expenses.

 

[CA85]

As mentioned above, you will get tax relief on the cost.

I've never claimed any work expenses before

There must be business costs? - mobile phone, internet, software licences, insurance, bank charges?

 

[nightofjoy]

Ah, ok, so I can't claim back the entire cost of the computer as a business expense? The most I'll get a reduction for is £300?

What's this about claiming a weekly allowance for working from hom? I've been home based for 3 - 4 years now and have never claimed this.

Thanks.

 

[DontAsk]

I thought it was already explained above, but...

Ah, ok, so I can't claim back the entire cost of the computer as a business expense?

That's exactly what you do. Expenses come off profit.

The most I'll get a reduction for is £300?

Lower profit means lower tax, so you will save the tax on the full cost.

 

[paulears]

If this is your 'job' - then you can if working from home have quite a few expenses. It's not just the computer surely? If you are a graphics designer then you'll be buying fonts, software, licences, more and more storage - either in drives or online storage. You'll have printers and the price of ink and toner now is quite expensive. You are also using electricity, heat and water utitlities as part of your business. If you are reasonable in what you claim, it's a genuine business expense - and the cost of doing business is the key feature. It reduces your profit, and you pay taxes on your profits. As a very small business, maybe a small local accountant would be worth a fre half an hour chat with? Many love the little businesses that are a doddle to reconcile at the end of the year and therfore not mega expensive, but, as we often say, they can usually save you more than they cost. Computers, for example, their value falls so quickly, they might be better going in the books once, rather than a proportion written off every year, because at the end of that year they're worth very little. Lots of stuff you buy, like paper and ink are consumables and they're gone once used. If you have an adobe subscription, like I have, rather than the old buy system, then those subscriptions are a genuine expense. You cannot work without it. I now have an office - totally business use, but I still work at home in another studio - and there are 3 computers on 24/7 with NAS drives linking the two locations. I did a survey of my electrical consumption and have for years claimed 50% of my domestic electricity as a business expense because it's probably a minimum of 60% of what I use, and I think that reasonable. Gas for heating I worked out as lower, so I claim 33% of that, because heating the studio costs me less. In the office, loads more permanently on equipment but that is 100%, as is the business phone there and internet. The home one I don't bother with because it's not a lot. I don't claim for water and sewage at home but I do at the office. The scheme seems to work, and I think I could if I looked hard find more things, but I don't. I have a car we use and that is 100% private use, while the van goes to the business. For me one aspect I pay attention to now is postage - I hadn't realised how much it cost. It was a shock, it adds up. It's an expense.

I can't believe your business doesn't have far more overheads than a computer!

 

[MyAccountantOnline]

... I don't really have anything to claim for. You don't really print anything out when you work from home

...

I have no doubts whatsoever if you aren't claiming expenses you are paying avoidable and unnecessary tax.

You definitely incur costs working at home which you can claim.

If you don't want to use an accountant (and I do think the tax saving will exceed the cost) at least have a read here Simplified expenses if you're self-employed - GOV.UK (www.gov.uk)

 

[Chris Ashdown]

How about getting it on a business lease with option, to buy at end of lease, for small amount. that way you keep your cashflow healthy for any unexpected developments and maybe get a better computer. Payments spread over 3 or 5 years

 

[DontAsk]

I don't earn a great deal, I usually only pay around £2k - 2.5k in tax per year, so forking out £1,500 on a new mac is a massive amount of cash to lay out,

You can save "tax" by not paying the "Apple Tax"

 

[JEREMY HAWKE]

How about getting it on a business lease with option, to buy at end of lease, for small amount. that way you keep your cashflow healthy for any unexpected developments and maybe get a better computer. Payments spread over 3 or 5 years

I agree with Chris it is not just the tax advantages When the thing blows up they will replace or repair straight away without effecting your business

 

[paulears]

I don’t know any people who are ‘in business’ who only have one piece of electronics that is critical. You should have two as a minimum. Maybe not exactly the same in terms of quality or type, but if you have a Mac, you also have a much cheaper windows machine, or a second hand Mac. They go wrong. It’s what computers do. I do as part of my work, two very specific and different things, plus the usual word, excell and internet, so each year I upgrade one computer, two years as an absolute maximum, and video editing gets the news computer usually, the old video computer goes into the studio, the studio one goes to everyday duties, and with lots of shuffling, one ends up going to my grandson. He now has a still capable, but older iMac at the moment. One computer would be possible, but how many times do you press a button and windows needs to update, or apple wants to stick the latest os on it overnight? Luddites and the really knowledgeable may say ah, that’s a XxX update I don’t wish to do that as I have ZzZ on YyY app? But I’m not interested in computers, they’re just tools. I need the security of extra machines, plus I often work on multiple jobs at the same time. I can imagine a graphics designer with just one computer, but it’s scary!

 

[Deleted member 59730]

Payments spread over 3 or 5 years

I've always bought modern stuff outright. How would I cope with the £4,000 camera that became a doorstop after 12 months? I'd deeply resent still paying for it.

 

[Deleted member 59730]

When the thing blows up

So that's how you drive your vans.

 

[JEREMY HAWKE]

So that's how you drive your vans.

OK no joking
18 plate Citroen Relay blown up at 58,000 miles
68 Plate Citroen Relay Blown up at 132,000 mile

We have a 19 Peugot boxer here at the with a questionable past The engine was replaced at 36k I was told this last week when the alternator seized !

So yes laptops last longer than vans