[Perfect Windows]

This has to be one of the most misused yet repeated statements on this site and in lots of conversations down the pub.

If you spend money on something and it can be offset against tax, remember that you're still paying (if you're a basic rate payer)  77% of the cost of that item.

For proof, imagine you net out £10K of profits above your allowance.  You pay £2,300 tax (at 23%) - net salary after tax on this portion of your income = £7,700

Now, if you spend £1K on something or other, then your net profit drops to £9K and you pay £2,070 in tax - net salary on this is now £6,930

So £7,700 - £6,930 = £770, so you have paid 77% of the cost of the item out of your pocket.



So, next time someone tells you that you're OK, you get "X" free because you can offset it against tax, shoot them with my approval.


Vin

[Ronnie Bryce]

I have always reckoned that the guy's who say this have never paid tax, at least in self employment, why else would they think it so?

[tompoole]

The way look at it is I gotta earn the money to buy it so
Don't matter if you set it off against tax or put it down as capital
Expence, you still gotta get of ya backside To earn it..

[William McCafferty]

So, next time someone tells you that you're OK, you get "X" free because you can offset it against tax, shoot them with my approval.


Vin

and remember, you can off-set the cost of the bullet against your tax

[Paul Coleman]

This has to be one of the most misused yet repeated statements on this site and in lots of conversations down the pub.

If you spend money on something and it can be offset against tax, remember that you're still paying (if you're a basic rate payer)  77% of the cost of that item.

For proof, imagine you net out £10K of profits above your allowance.  You pay £2,300 tax (at 23%) - net salary after tax on this portion of your income = £7,700

Now, if you spend £1K on something or other, then your net profit drops to £9K and you pay £2,070 in tax - net salary on this is now £6,930

So £7,700 - £6,930 = £770, so you have paid 77% of the cost of the item out of your pocket.



So, next time someone tells you that you're OK, you get "X" free because you can offset it against tax, shoot them with my approval.


Vin

It is a little bit better than you state because you should allow for the profit based portion of NI to come off as well.  Not sure exactly how much that is but somewhere around 10% after the first £7k (haven't checked the exact number in a while).

[Perfect Windows]

It is a little bit better than you state because you should allow for the profit based portion of NI to come off as well.  Not sure exactly how much that is but somewhere around 10% after the first £7k (haven't checked the exact number in a while).

Fair point, so you're paying 67% of the cost.

Vin

[GoodFella2006]

I thought about collecting used fryer oil and turn them into biodiesel.(Most of my friends are kebab/fish and chip shop owners/staff.)

That would save me around 3 grand a year.

But if i don't show fuel to taxman as expense,i will pay probably 3 grand more tax so why bother.

Correct the foreigner please,if i'm wrong.

[mikecam]

I thought about collecting used fryer oil and turn them into biodiesel.(Most of my friends are kebab/fish and chip shop owners/staff.)

That would save me around 3 grand a year.

But if i don't show fuel to taxman as expense,i will pay probably 3 grand more tax so why bother.

Correct the foreigner please,if i'm wrong.

You're wrong !!! If you 'save' 3 grand on fuel costs then your expenses to the tax man show 3k less ? Yes? Ok, so throw the 3 k back into the equasion, an extra 3 k on your profitability will equate to (roughly) 30% tax of that figure...so, £990. So it won't cost you 'probably 3 grand more tax', realistically that magical 3k figure will show you £2100 in your pocket and £900 to the tax man. Thats a rough work out off the top of my head. We can always go more in depth if you'd like?

[mikecam]

I thought about collecting used fryer oil and turn them into biodiesel.(Most of my friends are kebab/fish and chip shop owners/staff.)

That would save me around 3 grand a year.

But if i don't show fuel to taxman as expense,i will pay probably 3 grand more tax so why bother.

Correct the foreigner please,if i'm wrong.

Ironically this is what the OP is on about (i think !).

[LWC]

I remember buying loads of things a few years ago and i really didnt need to...becasue i thought like this!

Always remember what my acount said, spend 70p or give the tax man 30p. (rough numbers they are) and i always remembererd that, i was spending money to save money on tax...but i was spending more in the long run!

[tompoole]

The way I see it is the less I spend the more
I have..

[SherwoodCleaningSe]

The op is about right. Just because you can off set something against the tax it doesn't make it free, however if you need something for the business that you will use like a new van or a decant pole you will find that your tax bill can be lowered significantly. You just need to remember that you have to have the money to pay for your new toy first.

Simon.