Are you self employed?
If so, there are a number of reliefs, deductions and allowances that you can benefit from in order to reduce the amount of tax that you pay.
Most of the money that you spend in relation to running your business can be deducted in order to work out your business profits (and therefore what tax you will pay). Whilst there are many different types of expenditure that can be deducted in this way, here are five of the most common.
1. Professional Fees
If your business involves you joining a professional or trade body – for example if you are an accountant – you may be able to deduct the cost of joining a professional association. You may also be able to deduct the cost of subscriptions to trade or professional journals or publications.
2. Motoring Expenses
If you use a car or van for your business then you can generally deduct the cost of using your vehicle for business purposes.
For small businesses, the most common way of using this allowance is to claim a fixed business mileage rate. This means that you can claim a certain amount for every business mile that you undertake in a tax year, up to a specified limit. There are published mileage rates for cars and vans, motorcycles and cycles.
3. Capital Expenditure
Capital expenditure is money that you spend improving, creating or buying a business asset that you keep to earn the profits of your business. Typically, capital expenditure covers the cost of buying assets such as your business premises, computer hardware, machinery, office furniture or a vehicle.
If your business involves sales, the chances are that you will have to spend money on buying stock or raw materials to make your stock.
For example, if you run a bookshop you will have to buy stock (i.e. books). If you run a cake shop, you will have to buy sugar, flour and butter in order to make your stock.
Costs that you incur in running your business premises can also generally be used as an allowance. If you have business premises, you can generally deduct the cost of rent, rates, lighting, heating, insurance and repairs.
If you run your business from home, you can also generally deduct the business part of these costs. The amount you can claim is generally determined by the size of your home and the proportion of it that you use for business purposes.