Freelance workers need to have a number of essential tools in order to get the job done.
Laptops have increased their significance in the 21st century as a method of communicating with business clients as well as sending project details to customers instantly.
The good thing is that instead of purchasing a new laptop and absorbing the cost personally, this can be claimed as an expense.
Claiming a laptop as a business expense
Contractors are eligible in claiming expenses they have incurred as a result of working on their assignments. This includes laptops. Twenty percent of the money can be claimed on items that qualify.
What is included
It is significant to note that claiming is only applicable to equipment and expenses that are utilized for business purposes. Things must be categorized properly if a contractor desires to claim certain expenses. Claiming expenses also require proof that it is required to get the job done.
An example would be if a contractor uses his laptop 50% of the working and another 50% for watching YouTube videos, then he can only claim back 50% on the expenses.
Purchasing equipment that includes business computers, contractors can claim allowable expenses if one uses cash basis accounting. On the other hand, capital allowances are used if one utilizes traditional accounting.
Capital expenditure also involves anything that is purchased and own that helps a company earn profits in the business. Laptops can be included in this category.
HMRC has not included any limit to the amount that can be claimed. This allows contractors to purchase any kind of model that they deem can help them do their work. They only need to prove that the purchase supports their work assignments.
A sole trader business has the capital allowances deducted from the amount of tax paid during the declaration of earnings. This is opposed to the total cost. The amount of tax paid is not reduced by the amount of expenses, but by the tax that is due on that amount.
Steps required in claiming a laptop as an expense
Claiming a laptop as a business expense is made by adding it up with all the expense receipts for the year. These are all included on the annual self-assessment tax return.
Receipts are kept for five tax years. This is done in order to have evidence when HMRC desires to investigate the costs a contractor claims.
Additional expenses that can be claimed include computer software, hardware, repairs, maintenance, and upgrades. Office stationery and printer paper are also included in these expenses.
If you need coaching on how to claim expenses, you can ask our experts.