In 2012/13 my business made a loss with no income received. In addition I have a day job which provides me with a fixed monthly income.
I'm getting ready to complete my SA return online but wanted to get a general overview of the tax situation before I do.
My question here is a bit wooly, so appologies in advance, but:
In basic terms could you describe what happens in this situation? I can think of several possible answers, but I don't know which is right (if any).
For sake of example:
Gross day job income = £17,500 (PAYE deducted monthly by employer) Business loss = £500
I'm not asking for tax advice - just a "what practically are the mechanics" of this situation / what actions would you take on behalf of one of your clients?
Thanks in advance,
pDm
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my blog "the bookkeeper's in town - learning the hard way"
As an alternative, you may carry the loss forward to 2012-13 if you think that your self employed income in 2012-13 will be in excess of £7,605, as your marginal tax rate will be 29% (20% income tax, 9% class 4 NI).
Hi Nick - It's this aspect of the first year loss I was getting confused over. But now you've laid it out for me, I honestly do not expect my SE income to exceed the threshold as you've stated, so I'll probably benefit from doing as Kris says and just re-introducing the rebate as capital (and maybe buying a pizza with the change!)
I'm just starting to read up about personal tax allowances and how it all works - so no doubt I'll have numerous examples to work through over the coming months!
Thanks to you both for your help, pdm
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my blog "the bookkeeper's in town - learning the hard way"
If you do relieve the loss against 2012/13 Schedule E Income, do not forget that the loss is also allowable against Class 4 NIC.
So if you make a profit in 2013/14, you would get relief for the loss against Class 4 NIC by making an adjustment in Box 101 of the FULL self employment section.
You may not reduce your tax liability by much, but I would not lt HMRC get away with a penny!
I make Class 1 contributions via the day job, and asked for exception from Class 2 for the next two years - my SE profits aren't likely to tip me into Class 4 for a few years yet; at least not if I build the business slow and sensible like I'm planning to.
But who knows? I might be just around the corner from a dozen new clients!
I wish ;)
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my blog "the bookkeeper's in town - learning the hard way"
