Hi,

To keep maths simle i'll use £20000 as my annual salary in a full time job. I also want to start a business alongside my job.

Lets say in the first year I make a £1000 loss by buying stock, items for office, listing fees, hosting fees etc...

If I had not been in business I would have paid £2,705.00 on the full £20000 salary.

Am I right in thinking that as I lost a £1000 to business expenses that I would only pay tax on £19000 (£2,505.00) and the difference (£200) would come back to me as a tax rebate?

Thanks

You get taxed normally from your job at the prevailing rate anyway so put that issue to one side. Your business will pay no tax if making a loss and only taxed when you make a profit.

But as a sole trader investing part of my jobs salary into the business and then potentially losing it woudl that not get taken into account and a rebate paid accordingly?

Thanks

We need to be careful here with terminology. If your "self employement" generates a trading loss then yes this would be offest agaisnt taxable income and if you have already suffered the tax via PAYE you would be due a refund once you have completed a self assesment return.

However, this would need to be a "trading loss" e.g. you have incurred more costs than income generated. If you have invested in stock, and still hold it, this is NOT a trading loss, as you still have the stock in hand.

Hope this helps!

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Cheap Cosmetics === Wholesale Cosmetics

Thanks James, that's exactly what I meant but my wording is bad! I am new to all this.

Just one more question about the stock thing you mentioned.

Say for arguments sake I get to a year, realise there is no way I can suceed in the market I have chosen and so decide to sell the stock at a loss to recover some money, is that ok and would the remaining loss then be ok to offset?

Thanks

Originally Posted by SA12

Just one more question about the stock thing you mentioned.

Say for arguments sake I get to a year, realise there is no way I can suceed in the market I have chosen and so decide to sell the stock at a loss to recover some money, is that ok and would the remaining loss then be ok to offset?

Thanks

Based on what you have said, yes, as this would mean you have paid for stock and sold it at a loss in a trading business. Therfore a taxable loss to be offset agaisnt taxable income.

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Cheap Cosmetics === Wholesale Cosmetics

Originally Posted by SA12

Just one more question about the stock thing you mentioned.

Say for arguments sake I get to a year, realise there is no way I can suceed in the market I have chosen and so decide to sell the stock at a loss to recover some money, is that ok and would the remaining loss then be ok to offset?

Thanks

Yes, all trading losses can be offset against your taxable income !

planning for failure makes it harder to succeed tho !

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