Hi

I'd like a little help on this one. I am about to invest big time in a new instrument that is going to be an asset used in my teaching practice - as well as by me, probably every other minute of the day that's left!

Given my outlay is going to be quite large I would like to account for this in a way that reduces my tax burden for this and subsequent years if possible. My thinking is it will be used 60% by the business, 40% by the family. I would expect it to have a useful life for accounting purposes of 30 years, say? Can I treat it as an asset and depreciate over that time? If so does this come out of my operating profit as an ordinary expense item? And what are the current formulae for calculating depreciation and all that stuff?

I am trying to resist actually hiring an accountant as I do have a working knowledge of financials from a previous life, enough that so far I have done all my own books, and mine is only a small, simple business. But if any of you have views either way (eg I am clearly fooling myself and sound like a complete ignoramus to the properly informed) I would welcome those too!

Thanks in advance

Depreciation doesn't matter for this. You will get capital allowances.
You can claim the AIA, annual investment allowance, which is up to £50.000 in the year. I assume your instrument doesn't cost more than that. Let me know if it does.
This means that you can set the 60% business part of the asset off against your income this year.
If for some reason, loss of personal allowances for example, you don't want to do that then you can waive some of the allowance. Let me know if you need more information on this.
Feel free to ask for more information.
Dora

All equipment and maintenance of tools of your work can be set against income in your returns. expenses. As to updating the main asset, you can try the new piano as an expense, or perhaps ,as you point out , 60% as that is for your earning purposes. Every 4 months' tuning fees, plus heating, lighting,use of room, and any other you can think of. The Income tax return should name all these. You will probably know that most music shops, whether by mail order or personal shopping, should give you discount, especiallyif you have a Diploma or two. You do not have to pass that on to the pupils.Joining the Incorporated Soc. of Musicians Membership would also give you discounts of a large range of things, and not only music. also free legal advice, insurance for any accident on your property, representation in court in the event of recaltricent parents who renege on the terms of contract, (legally binding contract forms can be bought from the ISM). and any queries about the profession. You can also be on their website, a marvellous way to advertise yourself in your area. See their website. Busylizzie.

All equipment and maintenance of tools of your work can be set against income in your returns. expenses. As to updating the main asset, you can try the new piano as an expense, or perhaps ,as you point out , 60% as that is for your earning purposes. Every 4 months' tuning fees, plus heating, lighting,use of room, and any other you can think of. The Income tax return should name all these. You will probably know that most music shops, whether by mail order or personal shopping, should give you discount, especiallyif you have a Diploma or two. You do not have to pass that on to the pupils.Joining the Incorporated Soc. of Musicians Membership would also give you discounts of a large range of things, and not only music. also free legal advice, insurance for any accident on your property, representation in court in the event of recaltricent parents who renege on the terms of contract, (legally binding contract forms can be bought from the ISM). and any queries about the profession. You can also be on their website, a marvellous way to advertise yourself in your area. See their website. Busylizzie.
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Technically you shouldn't be able to claim a new piano as an expense because it is a replacement of an asset not a repair to an asset. But with a 100% capital allowance like the AIA the effect is the same so if you want it to you can claim the whole cost of the business element of the new piano this year. You should do that provided you don't waste any personal allowance.
Dora

Thank you Dora. Following your advice I have done a few numbers and this looks a very good solution to me. I assume from your latter comment that, so long as my business profit and other income do not total less than the total of my personal allowances and the AIA, I should claim the full allowance in one year. And you claim AIA on your tax return itself. Is that about right?

I'm greatly relieved that I don't have to get into depreciation and full blown asset accounting. I assume I would just need to include this in my own accounts, keep invoices and so on as normal. My only other question would be whether there would be capital gains implications later if I had to sell up? The avoidance of CGT has been behind my decision up to now to exclude any elements of house insurance, heat light and power etc etc from my expense accounting to date.

Ouch - brain hurts now... there really ought to be more running a business type training in some of these CT etc teaching courses I reckon!

I am going to need to check up on this but my understanding is that if your income is over £15,000 from teaching the piano you will have to submit accounts but it isn't hard to do and I'll help you off forum if you like.
If your income is less than this you need only report three figures, income, expenditure and profit.
Don't worry about the capital gains tax. Provided you don't argue that a room in your home is used exclusively for business there are no capital gains tax liabilities.
There would, however, be a clawback of the AIA if you stopped your business or sold the piano.
Suppose you paid £10,000 for a piano and it had 60% business use.
You would claim an AIA of £6,000.
Now suppose you sold the piano for £6,000 at some time in the future. 60% of the £6,000 would be clawed back so your income for that year would be increased by £3,600 (60% x £6,000) and you would have to pay tax on the extra £3,600.
This would also be the case if you just stopped your business. You would be deemed to sell yourself the piano for whatever its current market price was and 60% of the value would be clawed back as described above.
If this really scares you then claim the AIA and put the tax saved in an ISA or some other savings account so that if you ever sell the piano or cease to trade the extra tax is sitting in an account for you.
If you sell the piano and make a capital gain on it well done to you. The capital gains tax is likely to be a pretty small element of the profit, currently 18% with relief for assets sold for not much more than £6,000.
There is a lot of information here so feel free to ask me to explain in more detail.
Dora