Self-Employed: what % of software purchases tax deductable?

[j to tha l-o]

This is probably a really stupid question but I'll ask anyway...

I run a computer business and wondered how much of computer software purchases are tax deductable. I know I can get 40% back on buying PCs, is it the same for computer software too? Is all computer equipment and software treated the same only 40% deductable?

I'm about to make a sizable software purchase and I'm trying to calculate the amount we can afford to pay for this software after tax deductions.

Thanks in advance!

[ic]

I can't answer, but when I used to be a contractor I found the local tax office were very helpful for questions like this. Give them a call. :)

[MaleStrom]

Why only 40%? If it's a 100% business expense then you can claim 100% of the cost against your earnings - or did you mean that you pay tax at 40%, and therefore the net benefit is at 40%?
ie
Earn - £1000
PC costs (100% business use) - £100
Profit = £900 (£1000-£100)
Tax @ 40% on £900

[Remains]

What Malestrom said above.

Not sure what you mean by 40% at all?

You take the cost of things bought for you business, then deduct them from your total profit - the remaining amount is your taxable income. The aim being to get that as low as possible of course.

[j to tha l-o]

The PCs I buy are 100% for business use and I only get 40% or 50% against tax. (we even use some systems for servers - still only can claim 50% of the cost)

This is one of the advantages sold to businesses to go the leasing route versus purchases as you can claim 100% of the lease as a business expense. So it's definitely correct.

I'm not sure if computer software is treated the same.

I know I should seek professional advice on this. Unfortunately my accountant is unavailable until Monday next week.

[RBZ5416]

IIRC it will depend on factors such as the value of the purchase & whether you are a limited company or not. If limited then you would write off a proportion of the asset value over a period of time. No idea what the current rules are so as ic said, you really need professional advice, preferably in writing.

Surely your accountant should be your first port of call? Edit: too slow!

[MaleStrom]

On what basis are you only claiming 40% though?

[j to tha l-o]

I think I'm claiming 50% not 40% on computer system purchases. The 40% figure came from me Googling this morning for information.

[meeti roti]

Any equipment you buy form April 2008 qualifies for an Annual Investment Alowance of 100% up to £50,000 per tax year. This AFAIK covers any business equipment.


http://www.hmrc.gov.uk/budget2008/bn12.pdf

[BigH]

what meeti said

in past years, you've only been able to claim 40%/50% as a first year allowance on equipment - I think that's what he means

[rooo]

Does that mean you can claim for the entire value as an expense in 1 year rather than 3?

[Kryten]

Moving

[meeti roti]

Does that mean you can claim for the entire value as an expense in 1 year rather than 3?


yep makes life alot easier. Most small business should find the amount more than enough.

anything pools of equipment from previous years will still be written down as 25%.

[BigH]

anything pools of equipment from previous years will still be written down as 25%.

'fraid not - writing down allowances have been reduced to 20% pa

one hand gives, the other takes away

[j to tha l-o]

Thanks for the informative replies. You've all been very helpful as usual.

I'll have to ask my accountant about the Annual Investment Allowance. He didn't mention it recently when I was discussing the virtues of leasing our equipment versus buying.

[meeti roti]

Thanks for the informative replies. You've all been very helpful as usual.

I'll have to ask my accountant about the Annual Investment Allowance. He didn't mention it recently when I was discussing the virtues of leasing our equipment versus buying.

On th subject of accountants, there are some good ones but in my experience the bad ones seem to outnumber them.

I attended a workshop on self assessment run by HMRC and learnt how to file the return myself. Saved the accountants fee.

Weblink for those interested.Best of all its free!!! :clap::clap::clap:

http://www.hmrc.gov.uk/bst/work.htm