Class 2 National Insurance contributions: Small Earnings Exception: How Net Profit is calculated: Admissible expenses: Depreciation and capital allowances
Business assets (e.g. motor cars, vans, fittings and fixtures) normally reduce in value with age and use. An allowance has to be made for depreciation so that each year the correct cost to the business is identified and an appropriate sum can be set aside, by a deduction from profits, for their replacement. A common method of calculating the annual allowance is to spread the cost of the item over the period of its expected useful life after deducting its estimated scrap or disposable value. Notes to the business balance sheet sometimes indicate the method used for individual assets.
For tax purposes, there is no deduction for depreciation but the trader may claim capital allowances on plant and machinery. The Self Assessment information will show a deduction for any capital allowances that have been claimed. For the purposes of SEE, depreciation and capital allowances cannot both be deducted in respect of the same asset.