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WTC and net loss from self employment.

sarahuk3sarahuk3 Feels At HomeRegistered Posts: 31
Good Evening,

I have tried looking on HMRC website and have called tax credits but cannot get answers and wonderered if anyone can help.

My husband was employed last tax year until end Dec 10 and then went self employed in Jan.

Books are made up to the 31st March 2011.

On tax return his employment was 14,289

His net loss was from self employed (2709)
Tax Comp workings -
add back depreciation of 350
= 2359

AIA 100% totalled 5603

=Total loss (7962)

Hope the above all makes sense, what figure do give tax credits for last year!?! am i allowed to give the total £7962 as a loss?
We have a 3 year old that goes to nursery 4 days a week and i am employed so those figures are all ok but struggling to know what to give them and when i have asked them they don't know!!

Thank you in advance for any help.

Sarah

Comments

  • JodieRJodieR Experienced Mentor Registered Posts: 1,002
    I'm pretty sure you just put that your profits are nil.
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    I seem to recall you can deduct the loss (tax adjusted loss) from total employment income.

    I think you enter s/emp as 0 and employment as the employment minus loss figure.

    I did it years ago from the help notes you get with the TC renewal form, so the guidance must be there somewhere?
  • T.C.T.C. Experienced Mentor Registered, Tutor Posts: 1,448
    Yes, the loss is taken against the employment income. The best way to explain this is over the phone.
  • sarahuk3sarahuk3 Feels At Home Registered Posts: 31
    Thank you for all your help.

    When i called tax credits they said they didn't know what figure and they said to call self assessment helpline and they said they didn't know how the tax credits system worked.

    So I am supposed to be giving the total loss of £7962 deducted against the employment 14,289 for 10/11.

    so total income for my hubby would be £6327?
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    Yes that's my understanding.

    Google is your friend. "Tax credits loss on self employment" threw up a good few hits including this.

    http://www.revenuebenefits.org.uk/tax-credits/guidance/how-do-tax-credits-work/self-employed/
    A trading loss in a year must be set off against the claimant’s other income for that year. Where the trader is part of a couple and a joint claim is in force, a trading loss in a year must be set off, for tax credits, not only against the trader's current year income but against the joint income of the trader and his or her partner.

    I'm not sure on the credibility of this site but it looks ok. It seems to explain it with some links.
  • Gem7321Gem7321 Experienced Mentor DevonMAAT, AAT Licensed Accountant Posts: 1,438
    Sorry to go off on a tangent but if your hubby made a loss why are you using the AIA?
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    Gem7321 wrote: »
    Sorry to go off on a tangent but if your hubby made a loss why are you using the AIA?

    Presumably to increase the loss available for tax relief. If AIA not claimed, then he is only entitled to ordinary WDAs in the future, the AIA is only available in year one. If he's already made a loss before capital allowances, it makes every sense to claim as much CAs as you can to further increase the loss. The main time you wouldn't claim CAs is it he case of someone whose only income was self employment and who made, say, £5000 profit. Using CAs in this case would be a waste of personal allowances as on £5000 profit no tax would be payable. In the case of a loss there is no personal allowance wastage and a nice larger loss to carry forward or back or use against other income. :)
  • Gem7321Gem7321 Experienced Mentor DevonMAAT, AAT Licensed Accountant Posts: 1,438
    Thanks monsoon. I wasn't even thinking about loss relief just preserving personal allowance and writing down allowance - duh! Thank god I'm off on maternity leave in 4 weeks so won't be touching another tax return for a while!
  • sarahuk3sarahuk3 Feels At Home Registered Posts: 31
    Thank you for all your help, i'' be back on the phone this afternoon to tax credits then!! :)
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