Annual Investment Allowance

[phatmike10]

Hi, I was wondering if you could confirm something for me? I run a website that sells art in my spare time when I’m not at work.

For tax year 10/11 I had a revenue of £2,000 of which £500 were allowable expenses so a profit of £1,500. I spent £2,000 on capital purchases, so using the Annual Investment Allowance can I treat this £2,000 as an expense so my profit after AIA would be -£500?

If that’s correct can I then take 20% of the £500 loss and get a refund from the income tax i’ve paid on my employment earnings?

cheers

[joe90]

Yes in effect. You have a tax loss after AIA on your self-employment which you can set against other income in this year or last and thereby generate a tax refund, which would be around 20% for a BR taxpayer.

[phatmike10]

Great thanks Joe!