tax incentives for starting your own business

chardonnay_2

just wondered what tax incentives there are for starting your own business?

what sort of things can you claim the tax back on or write off?

Pennywise

There are very few "incentives".

What happens is that the expenses you incur WHOLLY AND EXCLUSIVELY for business purposes are deducted from your trading income and you pay tax on what's left over. There are some special rules for capital items of equipment, such as vehicles, computers, plant, etc where you have to spread the costs against trading income over several years to reflect that the asset lasts longer than a year. Also, you can't claim any deduction against trading income for the purchase of property.

So basically, you pay tax on what's left over, i.e. the profit. If your expenses exceed your trading income, you have made a loss which can only be used to claim a tax refund to the amount of tax you have actually paid (i.e. from employment).

You get no extra tax allowances - you get the same yearly personal allowance and the same tax rate bands as anyone else.

As to exactly what is allowed to be deducted from your trading income will depend on your trade but a general rule of thumb is that you can claim for any expenses that you wouldn't have incurred had you not been in self employment. For example, you can't claim your home telephone line rental, as you'd have paid it anyway, but you can claim for the additional call costs of business telephone calls.

MalcolmCooper

Abolutely. Also note that corporation tax is lower than personal tax so if you operate as a limited company you'll pay less tax on your profits. As soon as you release any profits to yourself as salary of course you'll pay personal tax. Just try to stay under the higher rate for as long as you can.