Let us sort your Self Assessment online. £119, all in. Learn more

Balancing Charge

A balancing charge is something HMRC uses to make sure that you don’t claim too much tax relief for a piece of equipment.

If you’re self-employed and you buy a piece of equipment (like a laptop or a car), you can claim capital allowances like the “annual investment allowance” (AIA) for the cost of that item.

If you later sell it, you might need to add a balancing charge to your profit.

Example of calculating the balancing charge if you’re self-employed:

  • let’s say you’re self-employed and bought a laptop for work
  • you paid £2,000 for it, and you also claimed AIA worth £2,000
  • the “tax written down value” of the laptop is now £0: the price minus the AIA that you just claimed
  • four years later you sold the laptop on eBay for £500. This is more than the “tax written down value”, so you’ll have to add a balancing charge to your profit, and then pay tax on it
  • you will calculate the balancing charge by adding the amount you sold the laptop for (£500) to the amount of capital allowances you claimed (£2,000), and then subtracting that figure from the amount you bought the laptop for (£2,000)
  • (£500 + £2,000) – £2,000 = £500 balancing charge.

You’ll need to add this £500 to your taxable self-employment profit in your Self Assessment tax return.

Hey there! We really hope this article helped you. Tax matters can be a dreadful topic at times. We know. That's why we started TaxScouts.
A stress-free way to getting your taxes done.

Have a minute? See how it works

More guides & useful information

Related terms

Let us sort your Self Assessment online. £119, all in.

That’s right. No matter how complicated it gets or why you need to do a return in the first place, it’ll cost £119 to get it done. That includes VAT, last-minute changes and all the support you may need.

How it works

1. Answer a few simple questions

And we mean a few. After a couple of minutes of answering questions online we’ll have everything we need to start working on your tax return.

2. Then get paired with a tax accountant

That’s right, you’ll be matched with a real accountant who is best suited to prepare your return. Plus, they’re on hand for questions whenever you need.

3. We file your Self Assessment for you

Once you’ve signed off your return, your TaxScouts accountant will file your return online with HMRC. That’s it! We told you it was simple.