Tax Tips

What you need to know about Tax

(Or what you've always wanted to know about tax, but your accountant wouldn't tell you).

There is one great advantage to being self employed and that is that the Tax Authorities realise that a lot of your day to day expenditure is Business Expenses.  With PAYE you pay tax on all your earnings above your normal Personal Allowances.  With Self - Employment you pay tax on all your earnings after deducting your Business Expenses, your Capital Allowances and Personal Allowances.

In both situations you are allowed your personal allowance.  From April 2000 Married Allowance was cancelled, however, if you have a child or children you will probably be entitled to Working Families Tax Credit, which includes Child Tax Credit.  People over Retiring Age are allowed Higher Personal Allowances and they also still receive Married Coupleas Allowance if born before 05/04/1935.

Allowable Business Expenses

The Inland Revenue ruling as to allowance of business expenses is 'anything spent wholly and exclusively for the business'.  There is no ruling as to necessity.  You will see therefore that any expense that is attributed to the business is allowed, even expenses which are partly private (these are apportioned).

Such Expenses, include and should be paid and entered into your cash book:

  • Car Expenses - Repairs, road tax, petrol, insurance, AA (your accountant will apportion a certain amount as personal use after consultation)
  • Telephone - This will be apportioned as above
  • Fax, Copier and all Machinery Rentals
  • Materials - Purchases for use in the business
  • Repairs and Maintenance Costs including Labour and Materials
  • Wages and Sub Contractor Costs
  • Insurances - All business insurance
  • Interest Payments - On loans, including car loans
  • Bank Interest and Charges
  • Tools and Consumables Items
  • Workwear and Laundry
  • Advertising and selling costs
  • Postage, Stationery and Photocopying etc.
  • Solicitors, Accountants and Professional fees
  • Equipment Hire
  • Travel and Subsistence - Fares, meals out on business etc.  (Not Entertaining)
  • Subscriptions - To trade organisations, professional bodies, books & magazines etc.
  • Rent and Rates - Of business premises
  • Heat and Light
  • Staff Welfare
  • Training Costs
  • Parking Tickets

The above is not exhaustive, but covers most of the normal items of expenditure.

What about Paying my Wife/Husband? >>
What about Capital Allowances? >>
What about National Insurance? >>

Business Tips

Business Tips

Whether you are a new business or have been trading for years we hope these notes will be of interest to you.