Self employed - what can I claim?
Discussion
I'm considering becoming self-employed as a consultant. I've always been an employee and am far from experienced in matters of tax and the associated benefits/pitfalls of being self-employed.
What I want to know is, what can I offset against tax to ensure I pay as little as possible when year end comes round?
Thanks,
NL
What I want to know is, what can I offset against tax to ensure I pay as little as possible when year end comes round?
Thanks,
NL
Any expenses incurred "wholly and exclusively for the purpose of the trade" are allowable.
There are a couple of exceptions, the most important being "Business Entertaining" which is never allowable.
The other concept non-accountants/tax advisers don't always understand is the differentiation between "Capital" expenditure and "Revenue" expenditure and the different way capital costs are treated in accounts and in tax computations.
The vast bulk of "lay" people who do their own self assessment tax returns get these areas totally wrong.
There are a couple of exceptions, the most important being "Business Entertaining" which is never allowable.
The other concept non-accountants/tax advisers don't always understand is the differentiation between "Capital" expenditure and "Revenue" expenditure and the different way capital costs are treated in accounts and in tax computations.
The vast bulk of "lay" people who do their own self assessment tax returns get these areas totally wrong.
You'll find that accountants will have different views on what is an what is not acceptable. For instance, I put my wet-weather gear through the books but colleagues have told me their accountant won't accept this. My view is that whatever you can reasonably claim is a business-only expense is fine to put through.
Just leave it to your accountant anyway. Compile your monthly books, and give the lot to him/her at the end of the tax year to sort out.
Just leave it to your accountant anyway. Compile your monthly books, and give the lot to him/her at the end of the tax year to sort out.
As a Consultant I doubt you will have that many legitimate expenses. Obviously travel and vehicle costs but only for business use. Telephone and internet costs. 'Office' costs, computer, fax machine, stationary, postage etc. My accountant offsets an amount as I use a room in my house as an office. Business insurance. Accountant's fee!!
Can't see much else you will be able to claim for.
Buying a 'Company Car' is an option, you need to speak to an accountant to see if it is worthwhile.
Don't forget VAT, will you go over the VAT turnover threshold? (how much is it now??) You may end up having to charge VAT and claim back on you outgoings.
Can't see much else you will be able to claim for.
Buying a 'Company Car' is an option, you need to speak to an accountant to see if it is worthwhile.
Don't forget VAT, will you go over the VAT turnover threshold? (how much is it now??) You may end up having to charge VAT and claim back on you outgoings.
Parrot of Doom said:
You'll find that accountants will have different views on what is an what is not acceptable. For instance, I put my wet-weather gear through the books but colleagues have told me their accountant won't accept this. My view is that whatever you can reasonably claim is a business-only expense is fine to put through.
Just leave it to your accountant anyway. Compile your monthly books, and give the lot to him/her at the end of the tax year to sort out.
"Protective Clioothing" is a genuine business cost and, if the clothing is obviously of a "protective" nature (helmets, goggles, work gloves, boiler suits, overalls, unifirms, steel capped boots etc) then there should be no problem claiming such costs. The Revenue are not so keen on people claiming "ordinary" clothing as business costs.Just leave it to your accountant anyway. Compile your monthly books, and give the lot to him/her at the end of the tax year to sort out.
I was told that a good accountant will save their own fees in helping you minimise your tax liability, and that was true for me for a number of years until we went limited co, and even then he made a decent headway compared to the figures I keep. The last year or so as I have got a bit more knowledgeable and he has less room to manouvere those gaps have closed but certainly for a self employed person with equipment to buy, vehicles to run and even wages to pay I would suggest a good accountant is your best investment.
I chose one with a good local reputation and one who keeps me in line, as there will always be those recommended because 'they save me a fortune because they know all the wrinkles and tell me what to say'. My thinking was if the guy who does my car and decorates my house knows that, so do HMRC and I don't want to be first port of call when HMRC have a bit of slack time.
Golden rule: don't mess with the HMRC.
Useful stuff to 'consider' as 'possible' business expenses:
Rent/rates/gas/electric etc for your own home for any parts dedicated to business. So if half of the rooms in your home are dedicated to: office, work stations, storage for business etc - then half of all bills are business related!
Car: allowance for miles covered for business use, think it's 40p a mile (need to check). So if you do 10,000 miles related to business, you can claim £4000 as an 'expense'! (+ Fuel costs, but not the vehicle unless it's a van). I don't think there's any good reason to get a 'company car', these became expensive back in the 1980's when huge taxes were put on havin g one. And Gordon Brown put even more taxes on company cars, but that of course had no effect on vehicle sales whatsoever.
Holidays: If you travel abroad constantly, the whole trip can be claimed as a business expense provided the main reason for going, and most of what you do there, is business related. If it's a split holiday/business, then you can claim half the costs.
If anyone knows of any other interesting ones, list them! Even if they don't apply to everyone, there could be something I'm missing!
Rent/rates/gas/electric etc for your own home for any parts dedicated to business. So if half of the rooms in your home are dedicated to: office, work stations, storage for business etc - then half of all bills are business related!
Car: allowance for miles covered for business use, think it's 40p a mile (need to check). So if you do 10,000 miles related to business, you can claim £4000 as an 'expense'! (+ Fuel costs, but not the vehicle unless it's a van). I don't think there's any good reason to get a 'company car', these became expensive back in the 1980's when huge taxes were put on havin g one. And Gordon Brown put even more taxes on company cars, but that of course had no effect on vehicle sales whatsoever.
Holidays: If you travel abroad constantly, the whole trip can be claimed as a business expense provided the main reason for going, and most of what you do there, is business related. If it's a split holiday/business, then you can claim half the costs.
If anyone knows of any other interesting ones, list them! Even if they don't apply to everyone, there could be something I'm missing!
Edited by Cpn Jack Spanner on Wednesday 28th January 09:58
Cpn Jack Spanner said:
Useful stuff to 'consider' as 'possible' business expenses:
Rent/rates/gas/electric etc for your own home for any parts dedicated to business. So if half of the rooms in your home are dedicated to: office, work stations, storage for business etc - then half of all bills are business related!
Car: allowance for miles covered for business use, think it's 40p a mile (need to check). So if you do 10,000 miles related to business, you can claim £4000 as an 'expense'! (+ Fuel costs, but not the vehicle unless it's a van). I don't think there's any good reason to get a 'company car', these became expensive back in the 1980's when huge taxes were put on havin g one. And Gordon Brown put even more taxes on company cars, but that of course had no effect on vehicle sales whatsoever.
Holidays: If you travel abroad constantly, the whole trip can be claimed as a business expense provided the main reason for going, and most of what you do there, is business related. If it's a split holiday/business, then you can claim half the costs.
If anyone knows of any other interesting ones, list them! Even if they don't apply to everyone, there could be something I'm missing!
Don't confuse the OP. Company Car regulations apply to "employees and directors" so a sole trader need not be concerned witrh them.Rent/rates/gas/electric etc for your own home for any parts dedicated to business. So if half of the rooms in your home are dedicated to: office, work stations, storage for business etc - then half of all bills are business related!
Car: allowance for miles covered for business use, think it's 40p a mile (need to check). So if you do 10,000 miles related to business, you can claim £4000 as an 'expense'! (+ Fuel costs, but not the vehicle unless it's a van). I don't think there's any good reason to get a 'company car', these became expensive back in the 1980's when huge taxes were put on havin g one. And Gordon Brown put even more taxes on company cars, but that of course had no effect on vehicle sales whatsoever.
Holidays: If you travel abroad constantly, the whole trip can be claimed as a business expense provided the main reason for going, and most of what you do there, is business related. If it's a split holiday/business, then you can claim half the costs.
If anyone knows of any other interesting ones, list them! Even if they don't apply to everyone, there could be something I'm missing!
Edited by Cpn Jack Spanner on Wednesday 28th January 09:58
Also, it is doubtful that the Revenue would agree to 50% of your home being dedicated to business useage. They will normally accept a proprtion of these domestic costs based on the use of one room - so anything from 1/4 to 1/7 is the norm - depending on the house.
Don't confuse the OP. Company Car regulations apply to "employees and directors" so a sole trader need not be concerned witrh them.
Also, it is doubtful that the Revenue would agree to 50% of your home being dedicated to business useage. They will normally accept a proprtion of these domestic costs based on the use of one room - so anything from 1/4 to 1/7 is the norm - depending on the house.
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+1 Agree, and if one did try to claim 50% of one's home for business use, then perhaps the HMR&C on didposal of the home might look at CGT on the disposal gain.
The above, together with other expenses that linked to both the business and one’s home and private/personal life, such as the family car, home telephone, internet etc. etc., then I personally deduct a percentage of the total cost for personal use.
My accounts show a 25% deduction for personal/private use for the above type bills, as for using a room in the home for business use, I deduct an allowance of £500 per accounting year.
Wings said:
Don't confuse the OP. Company Car regulations apply to "employees and directors" so a sole trader need not be concerned witrh them.
Also, it is doubtful that the Revenue would agree to 50% of your home being dedicated to business useage. They will normally accept a proprtion of these domestic costs based on the use of one room - so anything from 1/4 to 1/7 is the norm - depending on the house.
+1 Agree, and if one did try to claim 50% of one's home for business use, then perhaps the HMR&C on didposal of the home might look at CGT on the disposal gain.Also, it is doubtful that the Revenue would agree to 50% of your home being dedicated to business useage. They will normally accept a proprtion of these domestic costs based on the use of one room - so anything from 1/4 to 1/7 is the norm - depending on the house.
The above, together with other expenses that linked to both the business and one’s home and private/personal life, such as the family car, home telephone, internet etc. etc., then I personally deduct a percentage of the total cost for personal use.
My accounts show a 25% deduction for personal/private use for the above type bills, as for using a room in the home for business use, I deduct an allowance of £500 per accounting year.
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