Sole trader - accounting

[Mojooo]

I've starting a little business on the side (youtube channel).

I don't expect to make any money for some time and at the moment its all expenditure.

I may set up as a Ltd co in the future but the moment I'm just a sole trader.

I also have a normal job PAYE

Is there any way or any point in 'accounting' for this expenditure at this stage? Its only £500 max.

If I make profit in 1 year can I come back and allow for this expenditure in anyway? Or is it 'gone' as its from the previous financial year?

Any good guidance on this to look at?

[uknick]

If you intend to carry on the same trade for a few years, it might be with registering for self employment with HMRC. You can then start to record any losses you make in the early years and set these off against future profits of the same trade.

But, you can't set off the losses against non trade income, i.e. PAYE, savings interest etc.

If you want guidance try HMRC themselves;

https://www.gov.uk/guidance/help-and-support-for-s...

I found the online webinars/courses pretty good and covered pretty much all assets needed for a sole trader.

[jonsp]

Are the amounts you have spent/will spend attracting VAT?

If yes you can register for VAT voluntarily and say you expect your turnover to be over the limit. That way you can claim VAT back. In my experience the VATman will take your word for that.

Obviously this might not be a sensible option if you're selling to consumers rather than businesses as you'd have to charge them VAT.

[Mojooo]

uknick said:

If you intend to carry on the same trade for a few years, it might be with registering for self employment with HMRC. You can then start to record any losses you make in the early years and set these off against future profits of the same trade.

But, you can't set off the losses against non trade income, i.e. PAYE, savings interest etc.

If you want guidance try HMRC themselves;

https://www.gov.uk/guidance/help-and-support-for-s...

I found the online webinars/courses pretty good and covered pretty much all assets needed for a sole trader.

I think my expenditure is so low that its not worth the hassle until such time I have to do the HMRC stuff (i.e making some actual money).

[Eric Mc]

uknick said:

But, you can't set off the losses against non trade income, i.e. PAYE, savings interest etc.

When did that change then?

The rules used to be -

Trading loss - can be offset against other income in same tax year - can be offset against future income from same trade - can be carried back against past income in same trade.

Did I miss something?

[Eric Mc]

Be aware - if HMRC think that the "losses" are being incurred because you are effectively running a hobby rather than a business, they will not consider any such losses as actual "trading losses" and then they cannot be offset against anything.

[uknick]

Eric Mc said:

When did that change then?

The rules used to be -

Trading loss - can be offset against other income in same tax year - can be offset against future income from same trade - can be carried back against past income in same trade.

Did I miss something?

No, you did not miss anything. I missed the gaping hole in my reading ability!!

[Eric Mc]

Phew - things can slip buy sometimes.

If an individual is carrying out a legitimate trading activety and it happens to make a trading loss in a particular tax year. In THAT tax year, the loss CAN be offset against the individual's other income of that same tax year. So, if the individual has a salaried employment in which they suffer Income Tax under the PAYE system, it may be possible to have some of that PAYE refunded.

Claiming trading loss relief for small "hobby" businesses might be challenged by HMRC as they are aware that some activities may be more of a hobby rather than a business. If HMRC decide that the activity is indeed a hobby, then any losses incurred cannot be claimed.

[Mojooo]

OK so if you are a higher rate tax payer and you spend £500 on a business (loss) - what does that mean in practice?

[Eric Mc]

Mojooo said:

OK so if you are a higher rate tax payer and you spend £500 on a business (loss) - what does that mean in practice?

When completing your Self Assessment tax return for the relevant tax year, you make the loss relief claim and you indicate how you want the loss to be relieved i.e. you want to -

offset it against other income in the same year
or
carry it forward for offset against future trading profits (of the same trade)
or
carry it back for offset against prior year profits (of the same trade)

[mikeiow]

Mojooo said:

I've starting a little business on the side (youtube channel).

I don't expect to make any money for some time and at the moment its all expenditure.

I may set up as a Ltd co in the future but the moment I'm just a sole trader.

I also have a normal job PAYE

Is there any way or any point in 'accounting' for this expenditure at this stage? Its only £500 max.

If I make profit in 1 year can I come back and allow for this expenditure in anyway? Or is it 'gone' as its from the previous financial year?

Any good guidance on this to look at?

I’m wondering: what’s the point?
https://www.pistonheads.com/gassing/topic.asp?h=0&...

[Countdown]

mikeiow said:

I’m wondering: what’s the point?
https://www.pistonheads.com/gassing/topic.asp?h=0&...

Maybe Mojoo's side hustle is building nuclear bunkers

[mikeiow]

Countdown said:

mikeiow said:

I’m wondering: what’s the point?
https://www.pistonheads.com/gassing/topic.asp?h=0&...

Maybe Mojoo's side hustle is building nuclear bunkers

[Mojooo]

We survived March 17th

Thanks Eric.