Being An Employee And Self Employed And Taxes

[Thunderchild]

I work full time as an employee (well maybe not for much longer), and I am also self employed.

As self employed if I make a loss does that count against my total income for tax purposes and reduce the overall amount of tax i have to pay ?

[factor-fiction]

I know you work in this area, skyline, and it was you I had in mind when I said
"But tax is a funny area- we have some specialists who may know"

But what seems odd is that if you are right, an employed person could set up as self employed also, and then try to claim a whole chunk of household costs and expenditure as representing a loss on their self employed business, and offset it against tax in order to recover all their income tax.

Would it need properly audited accounts?

[Skyline D]

Thank you hjd. If there's anything more annoying than someone giving advice that is plain wrong it's someone insisting that correct advice is wrong.

For what it's worth Peter, have a look at this HMRC helpsheet and see what it suggests as the first way of relieving trade losses from self employment in a year is:
http://www.hmrc.gov.uk/helpsheets/hs227.pdf

Or see here from the HMRC Business Income Manual
http://www.hmrc.gov.uk/manuals/bimmanual/BIM75410.htm

[Skyline D]

No ff, that would be rendered pointless by the requirement to be carrying out a genuine commercial venture with an intent to realise a commercial profit caveat. It certainly wouldn't need "audited" accounts. I presume you didn't mean "audited" as that's a corporate thing and even then only now for companies that turnover £6.5m, have assets of over £3.26m or employ more than 50 people (any two thresholds surpassed means you need an audit). If you meant accounts would need to be professionally prepared then no they wouldn't. That's the basic tenet of self assessment. It's up to you to claim or not claim whatever is appropriate. You don't have to get anyone to do it for you. However, if HMRC investigate your claim (and clearly they are more likely to focus on self employed losses with people who have employed income also) and find you are breaking the law they will disallow the claim and levy penalties. That's the risk you take.

[Thunderchild]

Well looks like i tocked the wrong box this time. I'll know better next time.

[Skyline D]

You could send in an amended tax return but to be honest at the sort of money you are talking about it's fairly pointless unless you desperately need £200.

[pixie373]

Skyline is right. At least, that's how my accountant worked mine out.

[Peter Pedant]

I am sorry Skyline you are right and I am wrong
BIM 75700 clearly says one can allow trade losses against other income.

[Thunderchild]

I missed this second page. Yes factor friction I don't think that sort of scheme would last long. In my case despite appearances it can take some considerable time to go about buying stock and managing things including keeping a reasonable tally of sales so that if asked I can show exactly what I sold and for how much with the receipe number to back it up and I've had to buy items in bulk for resale, find space for then (OK I do it in a 2x2m room because they are tiny electronics parts and i have about 200'000 sitting in boxes on a shelf over my head) but it takes a fair bit of organizing and time to keep it all going.

Work are talking redundancies and it's 7 out of 55 this time (and of course certain people are safe like directors, managers and supervisors). They are asking for volunteers of course but also people willing to go part time or reduce hours. So I'm thinking time to bite the bullet and take 1-2 ours off each day and use the time to develop my self employed business along with being able to guarantee same day despatch and increase sales.

Yes the £200 is not worth worrying about

[Maydup]

Go for it Thunderchild.
Be happy and successful.

[Captain2]

Thunderchild
I think that what you are proposing is the best idea. If you can cut your hours to let you concentrate on your new project, but still keep a regular income, albeit smaller, coming in, it will give you some piece of mind.
Funnily enough, I'm doing it the other way round. I've had my own business for 30 years but am winding it down now so took a part time job to give me a bit of guaranteed income.
The thing is you will never know until you try - so I'd say go for it and good luck.

[Thunderchild]

well that is the plan. But I'm well aware of how fragile my part time work is. Unfortunately being at the bottom of the pay ladder means I can afford to loose little but if it helps save my job and helps others I don't see much option but it does mean that I loose less due to how the tax system works. If I take 4 hours a week off i loose £166 a month but that equates to a loss of £100 ish net and same for taking 2 hours a week off (we only do 4 and 1/2 days a week so no point in dropping any friday and for this to work it has to come off each day not take a day out).

[Skyline D]

Peter Pedant - "I am sorry Skyline you are right and I am wrong
BIM 75700 clearly says one can allow trade losses against other income."

Fair play to you for coming back and holding your hands up on the error instead of slinking away without further comment. Apology accepted. :-)