Tax relief for self employed

[Nicebloke]

I am going back to being self employed next year April/May (got 16th edition so will do 17th). I am aware what I can claim tax relief on, but my question is: This current tax year I will have paid 40% tax on my earnings, so in order to claim 40% tax back on what I spend on the business, will I have to buy all the bits and pieces in this tax year ( 2015-2016) and make a claim in this tax year. My concern is that if I dont buy all the bits and pieces I need this tax year, then in the new tax year my earnings wont go above the 20% tax band and I will lose out by a grand or more.

Apologies if the above doesn't make sense.

 

[Darkwood]

Welcome to the forum Nice bloke

 

[ian.settle1]

I am going back to being self employed next year April/May (got 16th edition so will do 17th). I am aware what I can claim tax relief on, but my question is: This current tax year I will have paid 40% tax on my earnings, so in order to claim 40% tax back on what I spend on the business, will I have to buy all the bits and pieces in this tax year ( 2015-2016) and make a claim in this tax year. My concern is that if I dont buy all the bits and pieces I need this tax year, then in the new tax year my earnings wont go above the 20% tax band and I will lose out by a grand or more.

Apologies if the above doesn't make sense.

You would be best speaking to an accountant to get the right answer.

I take it that you have been employed by someone with cards in and you have been paying tax as PAYE so you may not be able to claim the tax back starting up as self employed.

 

[Nicebloke]

Thanks for the welcome to the forum, and for the reply to my post.

I am not currently PAYE (salaried). I am considering doing the books myself, but even if I get an accountant I would rather leave it until the next tax year.

I can only assume that if I start the business in this tax year, then I would be able get a rebate on the 40% tax rate I would have paid, whereas next tax year I will only earn within the 20% tax bracket so I will get tax relief on 20%.

I accept that it's not life changing money, but if I spend 7k for the business then the difference between 20% or 40% tax relief is £1.400 and is better in my pocket than the tax office.

 

[Octopus]

Have you registered with HMRC for SE? Have you got an accountant?

But in the meantime keep ALL your receipts!

oh, and by the way, you won't have paid 40% on all your earnings, just the "top" bit!

 

[telectrix]

40% tax bracket. why go self employed to earn a pittance?

 

[snowhead]

Don't assume anything.
You need an Accountant BEFORE you start S/E and before you spend any money connected with S/E.

If you cease PAYE this year and change to S/E your total 2015/16 earnings will most likely still be over the 40% level.

 

[davesparks]

It is possible to claim back tax over previous years, not just the current year. When I first went self employed I have the massive outlay of buying tools, vehicle etc and the accountant used the P60's from the last five years or so to make a backwards claim of some sort

 

[Deleted member 26818]

You won't get 40% tax back per se.
All that happens, is that your expenses reduce your earnings.
So if you earned £10k in the 40% bracket, and your expenses are 2k, you will only have earned £8k in the 40% bracket.
There are other expenses that you may be able to claim for, such as travel, subsistence, mobile phone, internet, laundry, etc.

 

[Nicebloke]

Thanks for the replies, I get that not all tax is at the 40% rate (It's under 45k before it kicks in).

I earn over 45k currently but that is not 9-5 and involves lots of hours.

i get the bit that if I spend money on the business, I will only get tax relief on that as per my example above. I tried talking to the tax office about this but they couldn't answer what I thought was a relatively straight forward question.

I will likely start the business in this tax year, and that I guess will solve the issue.

 

[snowhead]

and that I guess will solve the issue.

See post#7

Assuming and guessing are not the way to to deal with Tax issues.

 

[Nicebloke]

See post#7

Assuming and guessing are not the way to to deal with Tax issues.

It is not exactly tax evasion I am looking to commit whether I am assuming or guessing. If I start the business in this tax year all above board then I will claim tax relief for what I entitled to for the business. If I have got it wrong then I may be worse off than I had hoped, but the tax man will not be complaining.

 

[Octopus]

It is not exactly tax evasion I am looking to commit whether I am assuming or guessing. If I start the business in this tax year all above board then I will claim tax relief for what I entitled to for the business. If I have got it wrong then I may be worse off than I had hoped, but the tax man will not be complaining.

Speak to an accountant - many will "give" the first hour FOC.

I wouldn't depend on an internet forum for tax advice!

 

[Nicebloke]

Speak to an accountant - many will "give" the first hour FOC.

I wouldn't depend on an internet forum for tax advice!

I think you might have a point.