Being self-employed means there is a lot to take on and remember. One of many being that your business will have various running costs. Allowable expenses are one to take note of as you can deduct some costs to work out your taxable profit.
You should be aware that allowable expenses do not include private purchases such as accommodation, food, clothing and holiday. In simpler terms anything spent on you and family members does not qualify as allowable expenses. If you own a limited company, there will be a different method for you to follow. You can deduct any business costs from your profit before tax. However, you must report any items that have been for personal use as a company benefit.
What can you claim?
In terms of the costs you can claim as allowable expenses, you can check that they cover office and travel costs. This may be phone bills, fuel or transport fares. It also covers clothing costs such as uniforms; salaries or any stock or raw materials that will need to be purchased. You may also have financial costs such as insurance or bank charges you can claim back. In terms of premises, you could claim back on costs such as heating, lighting or business rates.
What Capital allowances can I claim?
If you use traditional accounting, you can claim capital allowances when you buy something that is related to your business. This may be equipment, machinery or business vehicles such as company vans. If you use cash basis accounting and buy a vehicle for the business, you can claim capital allowance on it as well.
What can I claim regarding simplified expenses?
Simplified expenses are a method used to calculate some of your business expenses. You can do this by using flat rates rather than working out your actual business costs. This is not a necessity; this is just one of the options that could potentially be suitable for your business. This type of expense is only available to sole traders and business partnerships that are not connected to other companies as partners. You should know that you can use flat rates for vehicles used for the business as a cost; working from home and living in your business premises.
Record, record and record
Record how many miles you have done in the vehicle, hours you have worked from home and how many people lived on the premises over the course of the year. At the end of each tax year, you can use flat rates for those particular costs to work out your expenses.
If you are self–employed and need more advice on allowable expenses, please get in touch and call us on 01623 490120 or email i