If you are self employed, it is possible to claim allowances, reliefs and deductions which will help to reduce your tax bill at the year end. However, you can only claim expenditure that is used for your business as private expenditure is non-allowable.
Most of the reliefs, deductions and allowances can be claimed up to the previous four years, in addition to the current year. However, some may have a shorter time limit for claiming.
Expenditure is typically business, capital or private, and the type will affect whether or not you can claim relief. Capital expenditure is the practice of buying, improving or creating an asset for your business to gain profit. Equipment or vehicles which have been hired are not capital expenditure. Tax relief can be claimed for business expenditure as long as it isn’t capital expenditure, or non-allowable like entertaining. The expenditure has to be used wholly and exclusively for your business to qualify.
Private expenditure, which includes your wages or salary isn’t allowable and tax relief is not given against this expenditure. Common types of expenditure include business stock, stationery, motor and travel expenses, cost of premises, administration and payroll costs. Expenditure which is for business and private use can only be allowed if the business use can clearly be separated from the private use, and only the expenditure for the business may be claimed.
Motoring expenses for your business can be claimed in one of two ways; you can either claim a fixed mileage amount using the mileage rates provided by HM Revenue & Customs or you can claim the actual expense which is calculated by separating business and private mileage.
Expenses related to the cost of maintaining your business are also allowable which includes the rent, rates, heating and lighting, any repairs to the business premises and insurance. If you are self employed and you are running your business from your home, you can claim for the proportion of costs which relate to business use.
Administration costs can be claimed for, and includes the cost of business stationery, postage costs, telephone and fax costs. Professional subscriptions that are necessary for your business may also be claimed for, although HMRC have a list of approved professional bodies which qualify for relief.
There are other circumstances which qualify for tax relief, like renting out a room or being a foster carer, although strict criteria apply. You may also get tax relief if your business makes a loss. All reliefs, allowances and deductions can be claimed when you complete and submit your self assessment tax return.
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