Starting up your own business is exciting and nerve wrecking. You set off with visions of grandeur and dreams of wealth, but tax obligations and fear of failure linger in the back of your mind. It´s a natural feeling to have, but armed with knowledge of ways to reduce your tax liabilities will help calm the fear.
The most obvious tax relief is your expenses. The majority of expenses that are necessary for the running of your business are tax deductible so keep receipts of all your outgoings including travel, merchandise, stationary, tools of the trade, professional fees and magazine subscriptions. For more details and an exhaustive list of deductible expenses visit the HMRC website.
1 Tax relief for home workers
The majority of sole traders operate their business from home and HMRC allows you to deduct household expenses that are incurred through your work. The taxman however will only take into account a portion of your household expenses depending on how many hours you claim as work time and how much of your household you use for the operation of your business.
Expenses that are deductible include a percentage of your mortgage or rent payments, utility bills, insurance and alterations to the property. Alternatively you can claim £4 a week – which is easier to calculate!
If you use a telephone for work you can claim a percentage of your line rental together with call charges made during the course of your business. This can be a complicated calculation to work out from your phone bill if you make a lot of business calls and personal calls from the same phone – unless you can identify the numbers of course. It´s a good idea to log your business calls to help you work out how much you can claim back in expenses.
Your broadband charges can also be claimed back in part providing you can show evidence of how many hours you used broadband for business against the number of hours you surfed the net for personal use.
If you use a car for work you can claim 45p a mile for the first 10,000 miles and 25p a mile thereafter. Motor bikes can charge 24p a mile and cyclists 20p a mile. Mileage can only be claimed for business use – which does not include commuting if you work in the same office every day.
5 Website costs
The amount you spend on your website is one of the largest fixed payment you have each month – providing you are maintaining it for SEO purposes. Maintaining a website does not come cheap, but you can claim tax relief for the cost of building one, the hosting fees and any content you purchase from a third party, such as blog articles.
Advertising and marketing costs can also be claimed against your business to reduce tax liabilities together with professional fees from a specialist marketer, SEO expert, solicitor or accountant etc.
Always keep good records of your business expenses otherwise you could have complications with HMRC and they are known to hand out fines to taxpayers just for filling in the self assessment tax return in wrong. For more advise about what taxes you can claim as a sole trader contact Taxaccolega, a London accountant, on 08000 235 234 or email firstname.lastname@example.org.