The short version: A balancing charge is what happens when you claimed tax relief on business equipment and then sell it for more than its written down value. HMRC adds the difference back to your profits.
Wait, how does that work?
Say you bought a laptop for £2,000 and claimed the full amount through the Annual Investment Allowance. Its tax value is now £0. Four years later, you sell it on eBay for £500. That £500 gets added back to your taxable profit because you’d already had the full tax relief.
Why does this exist?
It stops you getting more tax relief than the actual cost of owning the equipment. You claimed £2,000 in relief. You got £500 back when you sold it. So the real cost to you was £1,500. The balancing charge corrects for that.
Does this apply to everything?
Only items you claimed capital allowances on. If you’re selling old office furniture you never claimed for, there’s no balancing charge.
Sold some business equipment and not sure how to report it? Get in touch and we’ll walk you through it.
