Garden shed used for tools. Expenditure!

2022work

I'm a sole trader in construction and need a shed to store my tools in. The only place I can put the shed is in the corner of my garden/site.

I have seen a shed online that I can get on finance paid over 3 years. If I purchase this shed, can I put this into my expenditure. The shed would only be used for storing my tools. Nothing else.

Allinall

You can write it off over 8 years by way of capital allowances.

12.5% per year.

2022work

If shed is 5k and if my income tax is 2000 a year, 625e comes off my tax every year for 8 years.

I'm not registered for vat..does this matter?

https://www.boards.ie/discussion/comment/119780321#Comment_119780321

You just cannot reclaim the VAT, so instead claim capital allowances (12.5% for 8 years) on the VAT inclusive cost of the shed.

mickdw

https://www.boards.ie/discussion/comment/119780321#Comment_119780321

Nope, you are miscalculating.

Assuming your garden shed claim is allowable, it's €625 per year for 8 years off your income, not off your tax bill so if paying tax at 20 percent, instead of paying 2000 income tax, you will pay 1875, saving €1000 tax over the 8 years or 20 percent of the outlay.

2022work

https://www.boards.ie/discussion/comment/119781073#Comment_119781073

I'm confused!

How is it 12.5% per year in first post. 625 per year for 8 years but only 125e a year of my tax. Very confusing.

Overall , the 5 k spent. Over 5 years I only get 12.5% of the 5k. ?

I was always of the belief at what I spent on tools, van, other expenses etc.. fully comes of my tax over the course of so many years. Essentially you get all what you spent previously back in saved taxes. Have I got it wrong and you only get a % of it back over so many years.

relax carry on

https://www.boards.ie/discussion/comment/119781586#Comment_119781586

Yes your understanding of expenses and capital allowances is incorrect. They reduce your income assessable to tax not the tax you are due to pay on the assessable income. So let's say you have a gross income of 20000 and expenses of 5000 and capital allowances of 1000. They reduce your income assessable to tax to 14000. You are then taxed on the 14000 instead of 20000.

mickdw

https://www.boards.ie/discussion/comment/119781586#Comment_119781586

You are confused because some of the replies here didn't pick up your mistake.

You spend 5k which in this case is allowable over 8 years. That's 625 per year to be knocked off your profits. Tax on 625 would be 125 so that is the saving assuming low rate tax.

Interest on any finance deal would also be fully allowable I would have thought.