Hi I have recently become self employed, I have been using a personal spare laptop, printer etc and some stationery wholly to run my business (no personal use as I have a separate one) How do I bring this in to my sole trading accounts as I purchased them privately a few years ago.
Hello @biobetty
It may not be worth doing (depending on value) as they were private purchases.
You could perhaps look at selling them to the business, but I would reccomend speaking to an accountant for professional advice.
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Taking the laptop as an example
You could bring them in as an asset.
You would have to come up with a reasonable estimate of their value, a fair value.
Say the laptop is worth ÂŁ300.
You would enter this into the accounts using a journal as follows:
The problem with doing this is that the laptop will continue to lose value and you’d need to depreciate it, which for such small sums might not be worth the effort of dealing with capital allowance calculations when you prepare your tax return.
An easier way is for the business to buy the items from you.
Decide on a value and then pay “yourself” for them.
Physically send ÂŁ300 out of your bank account and then record this as a purchase in QF.
The accounts will then look like this:
Repeat the above for the printer and the stationary.
Doing it this way treats the laptop and other items as more or less an expense and you avoid depreciation and capital allowance calculations.
This is a legitimate way of treating relatively low value assets. You could write yourself a policy stating that purchases of low value assets which cost less than ÂŁ500 will be expensed in the year of purchase.
If there isn’t enough free cash in your current account to pay for the items at the moment, you can still bring them in under misc purchases, but you would have to set yourself up as a supplier and create a purchase invoice. The amount that the business owes the supplier (you) will just remain as an unpaid invoice (liability) until the bank account has enough free cash to settle the bill.
Hope that helps!
Thanks for that, would I need to make an invoice from me (personal name) and then enter it into the business account as I would a normal purchase e.g if it was from Dell etc. Or is it fine as just a miscellaneous expense?
I would do what you just mentioned.
Yes, just create an invoice from you (seller) to the business (buyer) and then enter it as a normal purchase.
You could use misc purchases or misc expense if you wanted to, but I would avoid entering the items into an asset account such as 0030 Office Equipment.
This is because you would need to depreciate the laptop and when you file your tax return you would be entering into the capital allowance regime.
Although capital allowances are fairly straightforward, in your particular scenario there doesn’t seem any good reason to spend time dealing with this, particularly when using them or not using them will make no difference to your tax bill.
If you expense the item you will save 20% tax on ÂŁ300 = ÂŁ60
or
If you used capital allowances AIA you would save 20% tax on ÂŁ300 = ÂŁ60
Hope this helps.
When you, as a business, buy pre-owned assets from a connected person, i.e. you as an individual, then AIA is not available and you can only claim writing down allowances on the value. You would have to estimate the market value as at the date you brought them into the business, put them into a general pool, and calculate WDA at 18% of the written down value each year - you cannot claim the whole amount in one year.
Having said that, by the second year, if the written down value of the total pool is less than £1,000, you can then claim the whole amount that year. Note you can’t claim it in the first year.
Also be aware that if the assets are used at all for personal use, they have to go in separate, single-asset pools, and you reduce the WDA claimed by the percentage they are used for personal, not business, use. You can’t then apply the small pool allowance on these assets.
Finally, if you are using the cash basis for your accounts, you may think you can just expense the cost, but this would be incorrect, as you cannot expense capital items which were not “acquired or created for continuing use in the trade”.
I might be wrong, but someone who knows about the capital allowance regime seems unlikely to ask a question about how to introduce a used laptop into their books.
If I were new to this and asked for help in this help forum, the reply above talking about WDAs, capital allowance pools, balancing charges and so on would scare me off! The paragraph would only make sense to someone who is familiar with this area, and be double-dutch to someone asking for help to do their own books.
@biobetty, it’s up to you, but if it was me, I would do what I suggested above and don’t worry about capital allowances.
Feel free to direct message me if you want and I’d be happy to help out. 
So in simple terms you cannot claim the full expense of pre-owned assets that you didn’t buy specifically for the business. You can claim 18% of the market value each year. You cannot put it through as an expense for the full market value. What you are suggesting is incorrect. Perhaps someone in business needs to read up about the capital allowances regime if they don’t understand it, or engage the services of an accountant.
This seems very complicated for a used laptop!
I wouldn’t want to:
- create a fixed asset register for a ÂŁ300 used laptop
- learn about how to navigate the capital allowance regime.
I would want to get on with running my business, particularly when the net effect is a tax saving of ÂŁ60.
If biobetty used the capital allowance route, this is what would happen:
Assumptions:
- There are no other assets in the main pool, only a ÂŁ300 laptop
- Time period is a 12 month accounting year
I can find no requirement that WDA has to be applied to a pool in these circumstances before a small pools allowance can be utilised. So the opening balance of ÂŁ300 can be used for the small pools allowance immediately.
Tax saved via capital allowance route = ÂŁ60
Tax saved via expensing route = ÂŁ60
Why complicate things?
Paying an accountant for this would be more than ÂŁ60 which is, I guess, why help forums like this are here.
Tax doesn’t have to be taxing 