Self Assessment Form Madness I Need Advice

[nellypope]

My annual turnover is less than a Grand for crying out loud! Which is fine, with the books balanced I'm in the black, however filling out my self assessment for is proving a bit of nightmare, but only because this is the first time I've ever done it.

My question is as follows: I'm a graphic designer (officially trading since Sep 2013) Outgoings are one payment, to Adobe my software supplier every month, and one payment to my print reseller . . . really simple. My incomings show a number of transactions which amount to just a shade under a grand.
Everyone keeps telling me I can declare my computer and lighting and heating etc as an outgoing, I understand this, but surely being as I can't see I will be eligible to have to pay anything at all, what would be the point in working all this out?? I have also declared myself on a low income and have the certificate so I don't have to pay class 2 contributions.

Would it be wise to include the cost of my computer etc.

[nellypope]

The computer was bought about a year before I started trading. I also bought a Time capsule (Mac hardware) fairly recently for business purposes.

[kvalidir]

Well I'd personally include everything possible and declare a loss, that way when things pick up everything is already clearly established.

[tamborine]

Phone or visit your local HMRC office. Theyre welcoming & helpful. Best to get 1st accounts correct and save tax distress years later.

[Sycamore3House]

If you run your business from home you can only put a proportion of these costs through the business. Usually anything that is extra to the normal household costs.
If you buy equipment for your business this will be classed as an asset but will depreciate each year and on your balance sheet this figure will reflect this.

[1eyedjack]

You can elect to be taxed on a cash basis, due to rules commencing in 2013-14. If you do not elect for the cash basis, then you can claim capital allowances for equipment, but the beauty of that is that the capital allowance claim can be deferred, to a future year when you may not have surplus personal allowances and it makes a real tax effect.

If you bought the computer for the purpose of the business, then you can bring in the entire cost of the computer, even if purchased a bit before the commencement of trade. If you did not buy it for the business, but happened to have it and make use of it when the business started, then you have to restrict the claim based on its market value on commencement of trade. As you can imagine, second hand computers do not have much by way of value. Finally, if and when you make a claim for the cost of the computer, you would have to restrict the claim proportionately for any private use. If not claimed in the first year, you would have to limit the annual claim to 18% of unclaimed residue each year (before private adjustment), and if you dispose of the machine you would have to account for its value as a receipt.

As you say, probably not worth the hassle, especially if you are restricted to market value at commencement. And if you claim for cash basis to apply the whole thing becomes otiose.

As for household running expenses, you may find it worthwhile checking the fixed scale rates provided under "simplified expenses" - HMRC website gives details. However if you have no other taxable income there seems to be no benefit in claiming, at least for that year.

Strictly, you don't get a choice not to claim expenses that are proper to the business. Although clearly not relevant to you, there is a common VAT fraud in which taxpayers suppress their sales to avoid registration and also suppress their expenses to make the margins look right. The profit of the business is a matter of fact, although in practice there are no direct tax penalties for overstatement (unless it gives rise to an understatement in another year).

Basically, stop worrying about it. Just fill in the figures that you mentioned and all will be well. Are you doing 30+ hours per week in this? Claiming working tax credits (while they are still around)?

[1eyedjack]

Oh, final point re comment on working tax credits - may not be of any use if you live with a spouse or partner on reasonable earnings - as it has to be a joint claim means tested based on combined income. But if spouse or partner is also on low earnings (or have children or disabilities in the household) is worth research. Also if it is of any benefit at all there may be added benefits to recording a trading loss, which can be set against partner's income for that purpose.

[nellypope]

1eyed Jack, thank you so much, I very much appreciate your answer. Yes I am claiming Cash basis, it seemed the simplest method for now and also my outgoings remain the same regardless of any large or ongoing contracts, basically I cannot envisage the business having to invest or acquire goods before final payment. I don't claim tax credits due to my husbands income, so you're right it should be a relatively straightforward exercise. The computer was bought quite a while before the business started, however I did buy a Time Capsule (hardware for clients storage) which I have liked to claim for, however it was bought in my husbands name. I will get there eventually. Thankyou