Is it true?

1072760

The reason i asked is i have a couple of friends who lease cars and say " it doesn't matter because i can take it off my tax! ".
i think the problem arises because the terms are too complicated - i know i bloody fell for it.
Tax is the amount of money taken away from all the money you have earned in that tax year.
'tax deductible' means you pay for the item or service MINUS the tax you WOULD have paid - so you pay 70%-75% of the retail price of the good or service in the end.
'tax deductible' is a quick way to say it but you do need a bit of knowledge about tax to fully understand the term - most people don't and they go around confusing everyone else...ho-hum

MrCarrot

A lot of people assume that when you're self employed you can "claim stuff back."

But no the tax man isn't going to pay for your laptop, stationary or anything else for that matter. As others have pointed out any businesses expenses you claim will simply reduce your tax bill.

It's quite simple yet a lot of people don't seem to be able to get their head around it - and they don't seem to grasp that saving their money and paying the tax leaves them with MORE money than if they went around buying stuff and claiming the tax back on it.

hopefulfooluk

No

1072760 wrote: »

The reason i asked is i have a couple of friends who lease cars and say " it doesn't matter because i can take it off my tax! ".
i think the problem arises because the terms are too complicated - i know i bloody fell for it.
Tax is the amount of money taken away from all the money you have earned in that tax year.
'tax deductible' means you pay for the item or service MINUS the tax you WOULD have paid - so you pay 70%-75% of the retail price of the good or service in the end.
'tax deductible' is a quick way to say it but you do need a bit of knowledge about tax to fully understand the term - most people don't and they go around confusing everyone else...ho-hum

Your friends have missed two key changes to that statement:

it doesn't matter because i can take it off my taxable liability!

They don't take the whole amount off what they owe for tax, that just wouldn't work - can you imagine what would happen to the economy if this was allowed to happen!

It reduces the profit (taxable liability) hence you don't pay as much tax. You don't get the thing for nothing!