1st self-employment in profit, 2nd - in loss. Taxation question...

rasalhage Registered Posts: 1 New contributor ?
Hi everyone

I have a client who has 2 genuine self-employed businesses (2008/09).
1st - has about £14K profit per year and very little expenses.
2nd - just started (9 months throgh the year) with very little income (about £1,200), more expenses and about £6,500 of capital expenditure (equipment for this specific business) - so it's about £5K losses.

If i do tax return with 2 separate self-employment accounts, of course, I would be able to off set 2nd business losses against the 1st business profits.. BUT... Because of the Class 4 NIC for the 1st business my client is going to pay quite a lot of taxes, which I personaly think is unfair. The person had only about £14K income (which is not much at all!) and is obveously trying hard to build a decent business (the 2nd (new) business is much more interesting and has much more potential for profits in the future).
If it was possible to pool together all the income, expenses and CA's, there would be not much taxes at all to pay. But this is against HMRC's rules, right?

May be somebody has some ideas or suggestions about the above??..

And a strange thing is that my client said that he called HMRC and described the situation with his 2 businesses and they said that he should put everything together... I don't know what to think...


  • Anne Boleyn
    Anne Boleyn Registered Posts: 196 ? ? ?
    Self employments

    Hi Rasalhage

    I'm not sure that I understand the problem. When you prepare the tax return, do two self employments, one with a £14K profit and one with a £5K loss.

    When the tax calculation is done they are amalgamated into Total self employment income, which is what the class 4 NI is calculated on. (obviously minus PA).

  • Emthi
    Emthi Registered Posts: 53 ? ? ?

    First you have to distinguish your allowable expenses and capital expenses, which is not included in the calculation.

    Second- If you are using any software, there is an option to add all your S/E incomes. So do not need to panic
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