Tax written down value is basically tax jargon related to Capital Allowances. You need to know the tax written down value of certain types of business assets when claiming tax relief for them.
Usually, when you buy an asset for your business, you can deduct the full value from your profits before tax using an Annual Investment Allowance (AIA). But some items don’t qualify for AIA. Cars, gifts or things you owned before you used them in your business are a few examples. Instead you use what’s known as Writing Down Allowances. To claim tax relief through Writing Down Allowances regularly, you need to know its tax written down value.
The tax written down value of a business asset is its original value, minus any capital allowances you’ve claimed on it.
The ‘original value’ is the amount you brought the asset into your business for, so:
The original value will need to be adjusted down if you’re self-employed and use the asset for personal use as well as for your business.
For example, let’s say you buy yourself a new laptop for £1,000. You plan on using it for 50% for work and 50% personally. The original value of the asset in your business would be £500, not £1,000. This is because you’re only using it for work purposes half of the time.
If you’ve already claimed AIA on a business asset, then its tax written down value will be nil. This is because you’ve already claimed 100% of the assets value through AIA.
Of course! We advise that you start a comprehensive spreadsheet to keep track of your taxable income and relevant expenses throughout the year in order to make your tax return more straightforward. This can be done on an Excel spreadsheet or Google sheet to keep things simple! Contact our team for more advice today!
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