Free Tax Tips for a Self-Employed person – Part 2

In Part 1 of our series of Free Tax Advice for the Self-Employed we covered how o keep your records tidy for the Accountant and ultimately the Tax office, Rent on Office Space and advice on Business Expenses. Here’s part 2 of our Tax Savings Tips:

Keeping Business separate to Pleasure in terms of Tax

The rule when it comes to Tax (and Stonehouse Accountants</strong rel=”nofollow”> in Peterborough agree) is that items only used for business use can be claimed for tax purposes and the business proportion of personal expenditure may be allowed though the rules are applied very strictly. If you purchase both business and personal items from a supplier the business purchase/expense only can be claimed, but if you purchased all the items on a single receipt you would be disallowed the cost of that journey as it was not only for business purposes.

Claiming for business expenses prior to trading

Business expenses incurred up to 7 years prior to business trading actually commencing can be deducted from the business turnover if these particular expenses were only for the future business purposes. Including such expenses in your accounting records as if they had been incurred on the first day of trading but show the actual purchase date. This is a great Tax Tip.

How do you claim for a partner’s wage against profit?

Did you know that a partner’s wages can be deducted as a business expense although there are particular rules which would be applied in such circumstances that to ensure the amount paid is both real and reasonable. A business would need to operate a PAYE scheme for the partners wages, deducting income tax and national insurance, perhaps using a package such as DIY Accounting are available using Payroll Software to produce all the statutory requirements. This work carried out must be real not made up and the rate paid reasonable for the nature of the work and the time spent. Evidence may also be required to show that the partners’ wages were actually physically paid to that partner, for example in the form of a cheque.

Accountant’s Top Tip for Vehicle costs or mileage allowances

Vehicle running costs and expenses such as fuel, excise duty, insurance, repairs and breakdown membership can be claimed as business expenses if the vehicle is used only for business purposes. Did you know that traveling from home to work is not business use and disallowed. So the proportion of a vehicle’s running costs and capital allowances which are claimable are dependent on the proportion the vehicle which is used for business and personal use. One good thing about parking is that Parking tickets for business purposes can be claimed. Shockingly, parking fines and penalties for motoring expenses are not claimable as business expenses for tax purposes. An alternative to claiming vehicle running costs and vehicle capital allowances can be to claim mileage allowances.

Peterborough Accountant Tax Tip for writing off expenditure against taxable profit

Depreciation is not accepted and replaced by Capital Allowances for the purposes of calculating the tax payable. Capital allowances are designed to write off the cost of purchasing a fixed asset over the life of the asset rather than in the financial year in which it was purchased whereby spreading the tax relief on the asset over those years.

An Accountant’s Top Tax Tip – Submit your tax return on time

It’s really important that Accounting records and Self assessment tax returns are be prepared well in advance of the first submission date of 30th September to enable the information to be checked by your Accountant and verified before submission to ensure all claimable expenses have been included. The final deadline for submission is 31st January with late returns and payments giving penalty fines and interest payments.

Stonehouse Accountants in Peterborough provide all the Accounting support and advice you could ever need to ensure you are claiming for as much tax allowance as you are owed.