Hi,
Hope its ok that I have signed up to this forum to get a question answered, but I can't find the answer in an obvious place anywhere else on the internet so wanted to ask it on a forum. Apologies if its not as intelligent a question as you're used to or is fairly obvious but any feedback would be appreciated. I've also used rounded figures in this question too but its the overall system that I'd like to see if anyone knows of the way it works.
So in the tax year 2015/16 I was continuously employed from the start of the tax year up to July when I left my job - and for those 4 months of that tax year I earnt £12,500 with tax code 1060L and paid PAYE tax of £1,600.
I then left the job and decided to become self-employed and used my savings to buy about £12,500 equipment I would need for the business during the year. My first trading day was late March 2016 so in the same tax year. After speaking to HMRC it seems that the 12,500 I earnt at the start of the tax year will be classed as income for my self employment, basically bringing me from a loss which I could carry forward to basically cause me to break even, despite not actually having so while being self-employed.
The difference this has made to my tax refund is fairly negligible but the difference that it has made to my profit is pretty huge - considering if I had started the business in the next tax year I would not have to class those earnings as self-employed income. My question is am I correct with the rules on this as its probably left me quite a bit worse off or are there other options?
Hop this makes sense and any response appreciated! And I'll respond to any extra info that someone may need to know to give a more complete picture.
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