Hi everyone. I recently registered as self-employed and I'm now using solar accounts as my accounting package. I have been recording all expenses that I spend on the business including some tools that I needed. However, it was mentioned that I would have to record the expense as a capital allowance and I'm wondering how I do that within the solar accounts software. She mentioned that a tool was an asset and that it was all about depreciation if say the tool was expected to last for longer than two years then I could claim part of the cost as a capital allowance. Is there a section in solar accounts where I could record this expense as opposed to just recording it as a normal expense. Sorry, just trying to get out all info told. Many thanks. Andrew

Hi Andrew,

You can record a capital allowance expense in the same way as depreciation - see this page for details:
http://www.solaraccounts.co.uk/help/how-to-record-depreciation-of-an-asset.php

Regards,

Hi Mark, many thanks for that information, that's a great help. One last thing, sorry, for depreciation on an item, how would you work that out? I saw the details on how to record a depreciation expense. I just mean the figure, how much depreciation there is on an item? Thanks. Andrew

Hi Andrew,

I'm afraid I'm not familiar with the rules for capital allowances - I recommend you ask your accountant or local tax office how to calculate the figure in your case.

Regards,

Hi Mark,

That's ok. Thanks for the information you have provided.

Andrew

Andrew,

If it's any help, the normal depreciation of capital assets is over 4 or 5 years. If you opt for 4 years you would depreciate by 25% per year, 5 years you would depreciate by 20%

You should not worry about Capital Allowances at this stage. This is a tax relief & is separate from the bookkeeping.

Big items lasting more than four or five years are recorded as Capital Expenditure e.g. Plant, Machinery, Motor Vehicles etc and are posted to their respective Asset accounts. Small tools are written off as an expense in the year in which they are purchased.

When you prepare your first year's accounts you will then calculate Capital Allowances on the Plant, Machinery, Vehicles that you bought during the year or introduced into the business at the start of the year. For example, most self employed people will bring a car or van into the business at it's market value and can claim Capital Allowances on a portion of this.

You would be better asking an accountant to do this at the end of the year. If the accountant uses Solar you can send them a copy of your Solar data file who will make any corrections necessary and identify the items on which Capital allowances can be claimed.

This accountant uses Solar.