Any accountants present (sole trader confusion)

I have confused the **** out of my self lol Every one i have spoken to has told me something differnt.

I am starting my own buisness doing carpentry and locksmithing, now i have confused my self.

I want to be sole trader only, not vat no ltd.

I have been setting this up for quite a while but declared self employed start of this tax year.

Now if i have spent ££££££ starting the buisness up with my own personal funds, what happens to this, is this take non taxable or is i just forgotten about.

im confused :cry:

i need to sort an accountant but i would just liek to know this please lol

If the money invested was used (as in tool/equip/vehicle purchase etc etc) whilst you were declared sole trader, then it can be claimed back come tax return time (this is called income & expenditure).

Being as the money invested in the first place would have been earned somewhere prior (PAYE most likely) then tax has already been paid on it therefore its untaxable a second time round*. And just for the record, HMRC dont just forget about things lol

On the flip side, say youve invested £10k for example (and claimed £10k of expenditure receipts), but in your first trading year you only clear £8k in invoiced profit (for example), that leaves £2k difference and you can end up with a tax bill, as oppose to a tax rebate as you'd hypothectically be claiming a larger figure back then youve actually earned to start with.

*You can/do/will get tax'd twice on funds if you use subcontractors.

Ok say i have spent £10,000 on buying a van, clothing, tools, ect ect

This money came from what i earnt paye

i will just be paying tax on what i earn and wont be able to write any of that of against it :(

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Originally Posted by djbrowney

I have confused the **** out of my self lol Every one i have spoken to has told me something differnt.

I am starting my own buisness doing carpentry and locksmithing, now i have confused my self.

I want to be sole trader only, not vat no ltd.

I have been setting this up for quite a while but declared self employed start of this tax year.

Now if i have spent ££££££ starting the buisness up with my own personal funds, what happens to this, is this take non taxable or is i just forgotten about.

im confused :cry:

i need to sort an accountant but i would just liek to know this please lol

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As a sole trader you are taxed on what you make ie income - expenses - capital allowances on your equipment bought (which is presumably why you put the money in ) claim any expenses incurred before trading including equipment in your first year

what you put in or take out is irrelevent

would be different as a limited co

Quote:

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Originally Posted by djbrowney

Ok say i have spent £10,000 on buying a van, clothing, tools, ect ect

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Was this spent before registering as sole trader? If so, then unfortunatly you wont be able to offset it against any future income :( (I dont think anyway :S)

Quote:

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Originally Posted by djbrowney

This money came from what i earnt paye

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Thats not a problem, in the highly unlikely circumstances of it being qeustioned, your old P60's/bank statements can prove any origin of these funds & that revenue was paid at source (at source being the employer paid it).

Quote:

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Originally Posted by djbrowney

i will just be paying tax on what i earn and wont be able to write any of that of against it :(

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Correct, however, once your registered as a sole trader, any further purchases, be it tools, clothing (for work ;) ) equipment, fuel, vehicle repair/service, office supplies/stationary/ink, vehicle hire, PPE blah blah blah can all be offset against income :thumb:

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Originally Posted by Nova00

As a sole trader you are taxed on what you make ie income - expenses - capital allowances on your equipment bought (which is presumably why you put the money in ) claim any expenses incurred before trading including equipment in your first year

what you put in or take out is irrelevent

would be different as a limited co

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So does this mean i can claim my expensses for my tool i have bough recently but not in my sole trader period ie before april this year :thumb:

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Originally Posted by Mike

Was this spent before registering as sole trader? If so, then unfortunatly you wont be able to offset it against any future income :(



Thats not a problem, in the highly unlikely circumstances of it being qeustioned, your old P60's/bank statements can prove any origin of these funds & that revenue was paid at source (at source being the employer paid it).



Correct, however, once your registered as a sole trader, any further purchases, be it tools, clothing (for work ;) ) equipment, fuel, vehicle repair/service, office supplies/stationary/ink, vehicle hire, PPE blah blah blah can all be offset against income :thumb:

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ah ok buddy looks like i have just sent a awful amount of money down the ****ter then :cry: :cry: :cry: :cry: :cry:

you mention no VAT, this depends on how much income you have. it used to be about 35K for a year i think.

have a look on direct gov for info, is a gold mine and helped me the other day for a similar situation.

and keep every bit of paper work EVER. it will make your life loads easier come tax man time.

Quote:

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Originally Posted by djbrowney

ah ok buddy looks like i have just sent a awful amount of money down the ****ter then :cry: :cry: :cry: :cry: :cry:

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Im not 100% sure on it though, as Ive never had to/tried to do this :S but from my expereince at running 2 business simultaneously AFAIK it cant be done, but like I say Ive never tried it nor even looked into it lol

Quote:

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Originally Posted by Mike

Was this spent before registering as sole trader? If so, then unfortunatly you wont be able to offset it against any future income :( (I dont think anyway :S)



Thats not a problem, in the highly unlikely circumstances of it being qeustioned, your old P60's/bank statements can prove any origin of these funds & that revenue was paid at source (at source being the employer paid it).



Correct, however, once your registered as a sole trader, any further purchases, be it tools, clothing (for work ;) ) equipment, fuel, vehicle repair/service, office supplies/stationary/ink, vehicle hire, PPE blah blah blah can all be offset against income :thumb:

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can I correct the position

Where the qualifying trade was set up and commenced on or after 6 April 1995 the qualifying pre-trading expenditure should be treated as incurred on the day on which the trade, profession or vocation is first carried on. It therefore enters into the calculations of the profit or loss for the first year of assessment in which the trade profession or vocation is first carried on. No separate claim for loss relief is required. http://www.hmrc.gov.uk/manuals/bimmanual/BIM46355.htm