There is a myriad of eligible expenses that you can claim as legitimate ways to lower taxes you have to pay. We've listed 10 Self-Assessment expenses that you might not know about. The running of a company isn't easy, particularly when it comes to accounting. When you're the owner of a business, you'll face a myriad of reporting regulations and obligations to comply with HMRC on behalf of your business. However, what many aspiring entrepreneurs don't realize is that when you begin your own business, you must register for self-assessment.
Sole traders that are self-employed directors of limited companies’ shareholders, directors as well as LLP members are all required to submit Tax returns for self-assessment to HMRC every year. Depending on their income, the majority of people are required to pay income tax as well as National Insurance contributions to the income that is tax deductible. The amount you have to pay will be different, based on the number of profits you earned in the prior tax year. The good news is that the UK Government appreciates that running your own business can be costly. This is the reason you're able to reduce the cost of a few of these expenses from your earnings which will reduce your tax liability. that you have to pay by way of Self-Assessment.
For help in saving cash, take an overview of the following list of Self-Assessment expenses you can be able to claim against the tax invoice.
1. Electricity and Gas Bill
It's true that many of us work from home because of the current circumstances. If you are a home-based worker. It is possible to claim a part of the costs for your home. It would be impossible to perform your job without the lighting on or with no heating during winter. Therefore, HMRC lets you determine the amount of your housing bill according to the hours you are working and the areas of your home.
2. Your Mortgage
If you work from home your business depends on the roof above your head to operate. It is therefore possible to take a portion of the interest you pay on your mortgage as an expense of the business. It is calculated using the percentage of your home that is used for business. If you're renting from a tenant, you could also claim some of the rent based on the amount that is being used for business use.
3. Office Supplies
Look around at what you use on a daily basis. You could claim for:
● Stationery
● Costs for printing
● Your mobile phone
● Software for computers
● Your laptop
You could even pay for "pre-trade expenses" to cover purchases made prior to the time you were legally self-employed. The rule of thumb applies to anything bought in the past seven years that is eligible as tax-deductible if you had bought these items during trading.
4. Council Tax
That's right. It is an expense of business and is determined by the length of time you're working and in which specific areas in your residence.
5. Motor Expenses
Did you use your vehicle for the company? If yes, then you may get a part of the expenses for maintenance and run. It's always beneficial to keep track of your mileage, even if it's not much. The reason for this is that you'll be able to claim 45p off of your tax bill for each mile you travel that exceeds 10,000 miles. Then, the tax rate is decreased to 25p per mile. You can also claim an additional 5p per mile if you are taking an employee or director if you drive your own vehicle that is used for business. In the case of motorcycles, this cost for motorcycles is 24 cents per mile regardless of the distance that was traveled during the tax year.
6. Your Phone Bill
The simplest way to make sure you claim your work calls is to use a separate phone for work. It is also possible to keep track of all of your calls on a single phone, so you can determine what percentage of your cost should be associated with work calls.
7. Marketing Expenses
An additional Self-assessment expense business owners frequently do not claim is the expense of marketing their company.
HMRC will permit the claim of business expenses:
● Advertising you've made in directories or newspapers
● Advertising in bulk mail
● Costs associated with free samples that you've made and disseminated
● Hosting and maintenance costs for websites
There are some exemptions to the general rule. It is not possible to claim expenses for entertaining customers and suppliers as well as for event expenses for hospitality on a year-end Self-Assessment return.
8. Donations to Charitable Organizations
If you donated money to charity in the past you might be able to claim it as a deduction on your Self-Assessment return. If you're a high-rate taxpayer, any donation to charities that are registered through gift aid will lower the tax burden.
9. Training
Training courses that are related to your company. This includes any training that can help you develop your abilities or gain knowledge that you can apply to your business. However, this doesn't apply to training classes that can help you establish your own business or expand into a different sector of business.
10. Costs of Legal and Financial Services
When you calculate the Self-Assessment expenses, you must also add any additional expenses, when you hire an accountant or solicitor, surveyor, architect, or other professional, you've made a payment to help you.
The Most Important Thing
The bottom line is that there are a lot of totally acceptable Self-Assessment expenses that HMRC will accept in your tax return, especially in the case of simple expenses. However, it's essential that you have the ability to prove that the expenses are legal. This means that you must keep track of all your business expenses to prove your expenditure. It is not necessary to submit these records for proof of expenses when you file a Self-Assessment tax return, and the odds are that nobody will ever ask to look them up. However, If HMRC decides to dig at your bank accounts and requests to see evidence that you have paid your bills, it is best to always have them on hand.
That's 10 of the top Self-Assessment expenses you should be taking advantage of - however, should you require more help you'll find a wealth of guides on how to use and helpful details in the PTA blog. If you've any concerns regarding the tax accountant, contact us and we'll be glad to assist you!