December, 2014

52 Ways To Save Tax #8

Crossword Self EmployedIf you’re self-employed then there are lots of ways that you can reduce your tax bill. In the next part of our series ‘52 Ways to Save Tax’ we look how you can reduce your earnings by claiming legitimate business expenses.

Keep reading to find out how claiming all your allowable expenses can help you to pay less tax.

52 Ways to Save Tax – Part 8: Claim All Your Self-Employed Expenses

If you are self employed then your business will incur running costs and expenses. When working out your profit – and the amount of tax that you pay – you are allowed to deduct these expenses from your earnings.

However, not all costs are considered ‘allowable expenses’. The general rule is that if an expense was incurred for the sole purpose of generating business profits then you are allowed to deduct it from your profit.

Next, we take a look at some common ‘allowable expenses’.

Expenses that you can claim as part of running your business

  • Bank, overdraft and credit card charges
  • Accountants and solicitors fees
  • Salaries, wages and bonuses for employees
  • Rent for business premises
  • Postage, stationery and office expenses
  • Car and van insurance
  • Phone, mobile, internet and fax running costs
  • Interest on bank and other business loans
  • Cost of raw materials used
  • Pensions and benefits for employees
  • Costs of specific business insurance
  • Car and van repairs and servicing
  • Business and water rates
  • Advertising in newspapers and directories
  • Hire purchase interest
  • Hotel room costs and meals on overnight business trips
  • Light, heat and power
  • Employer’s National Insurance Contributions
  • Direct cost of producing goods for sale
  • Train, bus air and taxi fares for business use
  • Property insurance
  • Cost of goods bought for resale
  • Website costs
  • Trade or professional journals or subscriptions
  • Use of home as office (business proportion only)
  • Repairs and maintenance of business premises and equipment

Some examples of costs that you cannot claim

While there are lots of business expenses that you can claim there are others that HMRC call ‘non-allowable’. These are expenses that you are not allowed to include when working out your business running costs. These include:

  • Entertaining clients and suppliers
  • Costs for private use of car or van
  • Cost of ordinary clothing
  • Payments to political parties, charities and clubs
  • Motoring/parking fines
  • Cost of travel between home and business
  • Depreciation of equipment
  • Repayments of loans or other finance agreements
  • Cost of any non-business part of premises
  • Own wages and drawings
  • Legal costs of buying property or large equipment
  • Costs of materials or goods bought for private use
  • Costs of improving or altering business premises or equipment