Do I get full tax relief for the computer that I bought before starting in practice?

Do I get full tax relief for the computer that I bought before starting in practice?

You are entitled to tax relief on the expenditure made on buying a computer (or for that matter any other equipment) for use in your practice. Your computer is classed as capital expenditure for the purpose of obtaining income tax relief, and the relief against your fee income is given in the form of capital allowances.

If you use a computer that you owned before going into practice,  then you use the “open market " value when it is first brought into business use as the base ‘cost’ for tax purposes.  The capital allowances you are entitled to on equipment are in the form of annual investment allowance (AIA) and from 6 April 2014 these are 100% of any expenditure up to £500,000.  As it is unlikely that your total expenditure on capital equipment in a year will exceed this amount, you will get full relief for the cost of your computer in the year of purchase. This is assuming any private use is purely incidental, otherwise the relief is restricted to take account of the private use element.

As an example, if your only item of equipment is a computer and a printer bought in September 2014, i.e. after you have started in practice, for £1,000, and you use it exclusively for business, then your allowances are:

2014/15: £1,000 (covered by annual investment allowance)

If you were to subsequently sell the computer for, say, £150, then those proceeds might fall to be taxed.

However, if you are using the new cash basis rules you claim the capital items in the accounts rather than claiming capital allowances. This is a simplification for some of the tax rules.

 

This answer was last checked May 2017. This answer is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this answer without taking individual advice based on the full facts of your case. The information given was correct at the time of release.