starting a new business advice please

by **sibley** on Sat Dec 10, 2011 5:08 pm

hi i am employed and pay tax.

i wanted to start another business but can i use the tax i pay from my job, to pay towards my other business if its making a loss? thanks for your help

by **Incredulum** on Sat Dec 10, 2011 5:40 pm

Yes - kind of, anyway.

If you are employed and earn say £20,000 in excess of the personal allowance then you will pay tax at 20% of £4,000.

Say your self-employment in its first year loses £10,000. You can offset this against your employment income and reclaim tax of £2,000.

by **sibley** on Sat Dec 10, 2011 8:04 pm

so if i pay £6k in tax paye and my new business makes a loss of £6k i can reclaim the difference? also does it count as a loss if i employ somone and pay them a wage if its causing the business to make a loss? thanks

by **mullet** on Sat Dec 10, 2011 8:26 pm

so if i pay £6k in tax paye and my new business makes a loss of £6k i can reclaim the difference?

No, to get the full £6K back your new business would have to suffer a loss of £30,000. You get relief on the loss at the appropriate rate of tax, you don't get the tax back to match the loss pound for pound. And yes, if you employ someone (and that cost is incurred wholly and exclusively for the purposes of the trade) then that will be a deduction from income which will be a factor in calculating a profit or loss.