I have just set up in business and have spent thousands of pounds on photography equipment. How does this affect my selfemployed accounts? - part 1 of 1

Published 01/11/2006

The treatment of such expenditure is what is referred to as a 'Capital Allowance' claim within your accounts because when a business buys a new fixed asset it is not normally possible to deduct the whole costs from your taxable profits.

What is a fixed asset?

In broad terms a fixed asset is any item that will be used in the business and will have an expected life of more than one year.

This will include cars, computer systems, and photography equipment.

What can be claimed?

The whole cost of the asset cannot be claimed in the year of purchase. Revenue & Customs allow a portion of the asset to be claimed each year that the asset is owned by the business. This portion is known as a 'capital allowance'. By granting a portion of the cost, recognition is given to the fact that the asset will last more than one accounting period.

The rates to be used depend on the nature of the asset: Most plant and machinery - 25% reducing balance Vans - 25% reducing balance Most cars - 25% reducing balance but limited to a maximum eligible cost of £12,000

Enhanced allowances

In some cases, enhanced allowances are permitted.

These are known as 'first-year allowances' (FYA) and have recently been granted to small businesses on items such as computers and IT equipment.

The rates of these allowances have ranged from 40% to 100% depending on when the item was bought. The enhanced rate is only granted in the first year; thereafter, the rate drops to 25%.

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1st Published 01/11/2006
last update 21/07/2022 10:43:56

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