Self Employed Business Expenses

love2learn

Hi,

I have questions about business expenses when self-employed. Can I deduct the full cost of a business expense from the tax owed at the end of the year?

For example. If I make £20,000 in a year and my tax came to 30% = £7200 (I know 30% is not the right banding, it's just for the example)

If I have a business expense for a flight costing £1000. Can I simply take the £1000 off the £7200 and pay the taxman £6000 at the end of the year?

Or would the £1000 just be taken off the £20,000 and I'd be taxed the 30% on the remaining £19,000?

Hope someone can help as this is bugging me :-(

chalkie99

Off the 20,000 I'm afraid

taxsaver

It's the second. Business expenses are deducted from the business' receipts before calculating the profit. You pay tax on the resultant profit.

love2learn

taxsaver wrote: »

It's the second. Business expenses are deducted from the business' receipts before calculating the profit. You pay tax on the resultant profit.

So does that basically mean I only save 30% off the £1000 expense so £300. And the other £700 comes off the over all profit?

taxsaver

It all comes off the profit, but as a result of your profit being £1,000 less then yes it also means you would save £300 of tax in your example.