Introduction -buy a computer for business
When you are a contractor or small business owner, what benefits do you receive if you buy a computer or laptop for business use? First, you can use the computer for business-related work, including 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. Therefore, can I buy a laptop through my business or can I buy a computer for my business?
What’s more, when you buy a new computer for business purposes, you may use this at home or work. If you are using this at home, there are two other things to consider:
When you are a contractor, you will be buying a laptop through your limited company. Please read on to find out the benefits when you do this.
Initial considerations -buy a computer for business
Can you claim a new business computer or small business laptop?
As a business owner, can I buy a laptop through my business? Alternatively, can I buy a computer for my business? If I do, will this be a business asset? In addition, how about the cost of other related smaller pieces of equipment or even a computer upgrade and will this be regarded as a business expense? The answers here are all yes, provided you use the computer or laptop mainly for your business, and any personal usage is only minor.
Using a personal laptop for work (UK)
If you are in business and are using your personal laptop for work, it stands to reason that you should be able to claim something in respect of this. If you are using this for work reasons much of the time, you could introduce this as a business asset. Therefore, what you will need to do is estimate the fair market value at the date your business started. As a result, you can bring this into your business at that value.
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 might be a Benefit in Kind (BIK), and you will need to show this upon form P11D. BIK is 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. Indeed, the computer or laptop business use should be regular, i.e., each working day. If personal use is only minor, you can claim for the computer or laptop through your business.
Which activities do you use a computer for?
As a contractor, you may use your company’s laptop for business use 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 at certain times during the week. However, many websites will help you set up posts in advance on your favourite social networks.
- Send emails to your business’s customers, clients, and contacts.
- Word processing, such as writing official letters from your business.
- Web browsing via one of the search engines.
Further tasks to use your computer for
- Create invoices to send to your clients. You could use a Word or 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 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.
- Suppose your company is a growing business with several employees. In that case, 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 when you buy a computer for business
Once you buy a laptop or computer for business use, the accounts and tax rules will govern how to treat computers and other equipment in your business accounts. Moreover, they also dictate how to treat business expenses for tax purposes.
You may incur computer-type running costs if you run your own business. These could include software and printer cartridges. Indeed, other costs may include online subscriptions and other small or low-cost items. It is correct to treat these types of costs as everyday 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 function 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 reasonable rate. The write-off of the value of the equipment in the business accounts will occur over several years. This is because assets do not lose their value until they are older or obsolete.
Finally, the depreciation 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.
Capital Allowances (CA)
A UK business can claim the Annual Investment Allowances (AIA) under the current CA rules when you buy a business laptop or computer. The current AIA is £1 million per annum, deductible against taxable profits subject to CT. Therefore, this is more than enough to cover a contractor’s IT equipment requirements.
Your accountant will ensure that they claim the correct CA for your business. Software such as FreeAgent will now let you treat equipment you buy for your company as Fixed Assets. Moreover, 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 uses the VAT Flat Rate Scheme, it cannot reclaim the VAT incurred on everyday business expenses. However, if you buy certain assets, such as company equipment, it can reclaim the input VAT. Important to note this is on the basis 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. Notably, this can 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 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 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 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, whereas the real value is £2,200. If you buy this same equipment yourself, it will cost you the full £2,200. Hence, I am sure you will agree that this is a worthwhile saving.
The Normal / Standard Scheme
If your company is VAT registered and uses the `normal scheme,’ it can claim back the VAT on any computer equipment, and it can also claim the VAT on all other everyday 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 small business laptop and associated equipment
Please ensure you obtain and retain invoices or receipts for all computer expenditures. Indeed, this will include both purchases of equipment and every-day 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.
Buy a computer for business -other considerations
Where do you start?
Where do you begin your search when you are looking to buy a laptop for business or a new business desktop PC? Due to the many PC makers, there is plenty of choice for desktop PCs and dedicated business PCs.
Finding one with highly efficient processing power and present-day technology will be wise.
There are plenty of great laptop deals, and depending on your price range, you should be able to find one suitable for your business. One thing to watch out for when you buy a new laptop is if it has long battery life.
The latest operating system commonly used 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 when you buy a computer for business
Within the PC market, when you search for desktop computers and laptops, there are various technical specifications to consider. Therefore, when you are looking to buy a computer or laptop for business use the technical terms to watch out for are:
- The core processor. Intel core is the leader in the market, and they have recently released Intel Core i7 and, subsequently, Intel Core i9. AMD Ryzen is another leader in the core processor market. Fairly new on the market are quad-core processors -these have four independent units named cores which read and execute central processing unit (CPU) instructions.
- x1 Carbon is also something to watch out for, which features a solid-state drive (SSD) instead of a hard drive.
- A sound graphics card. This component is a graphics processing unit, accelerating the processing required for creating and rendering images, animations, and videos.
- The number of USB ports may also be a factor depending on how many devices you plan to connect to your new computer.
Further technical terms look out for
Some further considerations are:
- A good size RAM. This term stands for Random Access Memory, which is for storing and processing your current data. 16GB RAM gives sufficient memory to run as many programs as you need but without slowing your computer down. This amount of memory is enough for any demanding software and other tasks such as video editing.
- You will need a good size hard drive for the long-term storage of various files. SSD is now a common choice as they are faster than hard drives. They also have more power and are energy efficient in addition to less weight and no noise. Furthermore, they also come in more practical sizes/form factors.
- Please note, data storage is measured in Gigabytes (GB). One gigabyte (GB) is made up of 1024MB, and one megabyte (MB) is made up of 1,024 kilobytes (KB). Similarly, data processing is measured in Gigahertz (GHz). This measures how quickly the Central Processing Unit (CPU) can retrieve and interpret instructions.
- 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 available options.
- Lenovo Thinkpads are also very popular. A Lenovo Thinkbook is also a good choice.
- There are also Mini PCs available now, which are a fraction of the size of a standard laptop or PC. Notably, they take up far less space than a regular-sized computer and, in addition, are less costly. Notably, these are aimed at the gaming market. However, the functions are as quick as most normal computers and laptops.
Finally, 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