Leasing a laptop or other ways of being tax efficient

[rarem]

Is it tax efficient to lease a laptop or IT equipment in general?

I'm a higher rate taxpayer but not vat registered at the moment. The purchase price is likely to be about £2,000. Can I just directly remove the cost of lease from my profits? And is this likely to be more efficient than just buying the laptop outright and offsetting against profits in some other way?

Thanks!

[qul]

You may wish to weigh up the pro's and con's of buying outright vs leasing first and seeing which gives a better deal overall, as you'd be getting tax relief anyway for the cost incurred by the business, as far as I'm aware.

if you pay in cash, then you'd claim £2k capital allowances, reducing taxable profit by £2k.

if the substance of the lease is that you are basically renting the laptop and don't take ownership of it in practical terms, then the total lease cost would normally be tax deductible on a straight line basis over the lease term.

if its more like a hire purchase and you're basically taking on a loan to acquire the laptop, then the cost excluding interest would be capitalised immediately, and this amount would be eligible for capital allowances, reducing your taxable profit. The interest charges would then be tax deductible as they arise over the lease term.

[Greg@CapitalCity]

Hi rarem,

In terms of tax deductions, both the outright purchase, and leasing, will be eligible. Leasing usually has a finance cost built in, and may reduce your ability to negotiate on price - which overall will usually make the lease more expensive than an outright purchase. In terms of overall best value for money, I would suggest you;
(1) Get registered for VAT on the flat rate scheme;
(2) Buy IT goods worth at least £2,000 incl VAT on a single receipt (and claim back the VAT);
(3) Then get a full tax deduction of your IT capital costs in the first year of trading;

Hope that helps.