The word “expenses” became a dirty word during the parliamentary
expenses scandal earlier this summer. But, if you’re self-employed, do not put
off claiming deductions, reliefs and allowances for legitimate business expenses
to reduce your tax bill.
HM Revenue & Customs allows you to deduct most of your
business expenditure to work out your profits (but you can’t deduct any
private expenditure). There are also special reliefs for capital
expenditure (i.e., one-off expenditure to buy or improve an asset you keep
and use for your business). And, you may be able to claim deductions,
reliefs and allowances for the current tax year and for the
previous six years.
It is vital, however, that you keep impeccable records of
all outgoings and income.
Private & Business Expenses
As a recent article in the Financial Times illustrated, an area where the
self-employed often come to grief is on the appropriate mixture of private and
“If you run your business from home, you can claim a portion of the
expenses. For example, if you have a six-room house and one room is used for
the office, you can claim one-sixth of the rent you are paying,” explained
Patricia Mock at Deloitte.
Utility bills can be harder to work out. “On the
annual electricity bill you could claim a reasonable portion,” says Mock. “You
would have to make an estimate of how much you use privately and for business.”
She points out that it is important that claims are realistic and
appropriate, and can be substantiated.
** Additional Information & Advice **
Always seek advice from an independent financial planner and a solicitor who
specialises in tax law before pursuing any tax avoidance scheme. You can be
matched with solicitor in your area for free via solicitor
matching services, which can also help you to understand the best course of
action for your situation and whether you are ready to hire a solicitor.
You may also like:
- Criminal law: Child sex abuse victims receive reduced compensation after…
- Immigration law: refused asylum seekers will be stripped of automatic…
- Criminal law: Trader found guilty of LIBOR rigging
- Immigration law: Government plans to evict illegal immigrants without a…
- International: German prosecutor accuses government of interference over treason case