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29-08-2012 #16
Couple of thoughts..
1. you're looking at this from the wrong angle... 5k net profit means you are paying ~£1.25k pa in tax? Any capital expenditure you make in the tax year is deductable against taxable income (see here for more info, it differ depending on whether you are a sole trader, partnership or a limited company) so at least some if not all of the cost of the equipment can be offset against tax. If you are careful you can do it across two tax years as well...
2. Investing 25% of your income into extending the business isnt unreasonable, so putting £1k+ a year back into the business to increase its turnover and profitability is sound planning
On that basis (and you need to do the numbers more appropriately for your actual situation - or get your accountant to) a £4k+ spend seems perfectly reasonable.... and the ROI is probably better than you think...
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