Buy a business computer
If you buy a laptop or computer for business, what are the benefits that you receive? First of all, you can use the computer in business related work and this will include carrying out projects that are part of your business. In addition, it can also assist you in many other areas of your company’s daily activities, some of which we will go over below. With this in mind, you may decide to buy a new computer for your business.
What’s more, when you buy a new computer for business purposes, you may use this at home or work. If you will be using this at home, there are two other things to think about. These are how to create your home office and what can you claim for the use of this.
Buy a laptop or computer for small business -initial considerations
Can you claim for a new business computer or business laptop?
As a business owner, are you able to claim for the cost of a computer or laptop as a business asset? In addition, how about the cost of other related smaller pieces of equipment or even a computer upgrade as a business expense? The answers here are yes provided that you use the computer mainly for your business and any personal usage is only minor.
Personal use of your computer
If you buy a business computer, it could be the case that you use your computer regularly for personal reasons. If this is so, HM Revenue & Customs (HMRC) might see that this has a `duality of purpose’. In this case, it would be treated as a Benefit In Kind (BIK) and you will need to show this upon form P11D. BIK are subject to income tax for you as the individual and Class 1A NI for your company.
When you buy a new computer, you must be using this for business reasons. This should also be on a regular basis i.e. each day or each other day. If personal use is only minor, you will be able to claim for the computer or laptop through your business.
What do you use a computer for?
As a contractor, you may use your company’s laptop while on a client site to perform your actual contract work. What’s more, you may also use it for other tasks for your business. These may include:
- Promote your business on social media. You can do this manually yourself at certain times during the week, however there are also now many websites out there that will help and enable you to set up posts in advance on your favourite social networks.
- Send emails to your business’s customers, clients, and contacts.
- Write official letters from your business.
Further tasks to use your computer for
- Create invoices to send to your clients. You could use a Word or an Excel template. Some software type packages will also let you create invoices as part of their service.
- If you have a business website, you can maintain this on your company’s new computer. Your work on the business website can include updates to your profile and your work history. You may also advertise your business and market your services online. Furthermore, you can also include updates in any skills and you can also showcase your completed projects. Finally, other work could consist of general website updates and maintenance.
- Graphic design type work and video editing as part of promotional work for your company.
- If your company is a growing business with a number of employees, you may also need to look up the term computer application in business for more ideas on business type software to run your company’s administration and finances more effectively.
The financial benefits of buying a new computer for your business
Once you buy a laptop or computer for business, accounts and tax rules will govern how to treat computers and other equipment in your business’ accounts. What’s more, they also dictate how to treat business expenses for tax purposes.
If you run your own business, you may incur computer type running costs. These could include software and printer cartridges. Other costs may include online subscriptions and other small or low-cost items. It is correct to treat these types of costs as normal business expenses. In turn, you can deduct these against your company’s profits that are subject to Corporation Tax (CT).
When you buy a new computer, printer, extra memory, servers or other equipment, these items have a longer life than other consumable purchases. Therefore, in your company’s accounts we will treat these as `Fixed Assets’.
Depreciation is a term that we use in accounting. This is the write off of part of the value of an asset over a period of time. We will therefore apply the depreciation to Fixed Assets in your business accounts at a suitable rate. The write off of the value of the equipment in the business accounts will occur over several years. This is due to the fact that assets do not lose their value until they are older or they are obsolete.
As a final note, the depreciation that we apply in the accounts is not deductible against tax. Instead, a business will claim `Capital Allowances’ (CA) against the equipment in its Corporation Tax workings
When you buy a business laptop or computer, under the current CA rules, a UK business can claim the Annual Investment Allowances (AIA). At the moment, the current AIA is £1 million per annum and this deductible against taxable profits that are subject to CT. Therefore, this is more than enough to cover a contractor’s IT equipment requirements.
Your accountant will make sure that they claim the correct CA for your business. Software such as FreeAgent will now let you treat equipment that you buy for your company as Fixed Assets. What’s more, it also allows you to select the depreciation rate and method used.
The VAT Flat Rate Scheme
If your business is registered for VAT and it is using the VAT Flat Rate Scheme it cannot reclaim the VAT incurred on normal business expenses. However, in the case of certain assets that you buy such as company equipment, it can reclaim the input VAT. This is provided that the total cost (including VAT) is at least £2,000. Equipment will include computers, laptops, and other electronic devices.
The above does not mean that you need to spend £2,000 or more on one piece of kit. You can buy a computer and other equipment at the same time. This could include a printer, a scanner, extra monitors, extra memory, speakers, etc. Therefore, if the combined cost comes to at least £2,000, you can claim for the VAT amount.
Let us assume that you buy a computer for your business costing £1,500, a printer costing £200, and memory costing £500. The total cost for your business would be £2,200. The VAT amount that is within this is 20/120ths or 1/6th, giving £366.67. Therefore, the cost to your company is £2,200 minus £336.67, which comes to £1,833.33. If your business is trading it will also save an extra 19% CT (£348.33) on this cost. Therefore, the bottom-line cost is £1,833.33 minus £348.33 which equals £1,485. In other words, the actual cost to your business is £1,485 for equipment, which is valued at £2,200. If you buy this same equipment yourself it will cost you the full £2,200. Hence, I am sure you will agree, this is a worthwhile saving.
The Normal Scheme
If your company is VAT registered and it uses the `normal scheme,’ it can claim back the VAT on any computer equipment. It can also claim the VAT on all other normal business expenses. In the example shown above computer equipment costing £2,200 would again cost your business £1,485 if your company is trading.
Receipts for your business computer or business laptop and associated equipment
Please make sure that you obtain and retain invoices or receipts for all computer expenditures. Indeed, this will include both purchases of equipment and normal running costs. The invoices should be made out in your company’s name wherever possible, rather than to you. Please arrange this when you buy it from a shop or store. If you buy online, please make sure that you obtain an electronic receipt.
Where do you start?
When you are looking to buy a laptop for business or indeed a new business desktop pc, where do you begin your search? Well, there is plenty of choice for desktop pcs and dedicated business pcs.
It will be wise to find one with highly efficient processing power and present-day technology.
There are plenty of great laptop deals out there and depending on your price range you should be able to find one that is suitable for your business. One thing to watch out for when you buy a new laptop is if it has a long battery life.
The latest operating system commonly in use is Windows 10, although Windows 11 is now on the market too. Windows 10 Pro is one of the best available and we will see what Windows 11 brings.
The technical terms look out for
Within in the PC market, when searching for desktop computers and laptops, other technical specifications to watch out for are:
- The core processor. Intel core are the leaders on the market and they have recently released Intel Core i7 and subsequently Intel Core i9. AMD Ryzen are another leader in the core processor market.
- x1 Carbon is also something to watch out for and this features a solid-state drive (SSD) instead of a hard drive.
- A good graphics card. This is a graphics processing unit and it accelerates the processing that is required for creating and rendering images, animations and video.
- The number of USB ports may also be factor depending on how many devices you are planning on connecting to your new computer.
Further technical terms look out for
- A good size RAM (Random Access Memory) memory for storing and processing your current data. You will also need a good size hard drive for the long-term storage of various types of files. Data storage is measured in terms of gigabytes (GB). One gigabyte (GB) is made up of 1024MB and one megabyte (MB) is made up of 1,024 kilobytes (KB).
- An external hard drive for extra storage space.
- Cloud storage is another consideration for saving your data.
- Furthermore, you should ensure your new computer has excellent security features in terms of authentication and access control.
- Macbook Pro, Macbook Air and Apple iMAC are other options that are available.
- Lenovo Thinkpads are also very popular.
As a final thought, when you buy a new computer or laptop as a contractor or small business owner, you are likely to use this mainly for work reasons. When you do this, your company can pay for this cost rather than you paying for it yourself and your company will also receive tax relief.
Link to Contractor Advice UK group on