Tax Relief for Self Employed

Dohplink

Can anyone help me ?
I have started a B&B and not sure exactly how to go about working out my figures for tax.
I know I can claim against gas/electricity/phone etc and I think also council tax?
What about mortgage?
How do I go about working out what is personal use and what is business use?
Thanks

PlutoinCapricorn

Your best bet is to go on an HMRC free course.

https://www.businesslink.gov.uk is full of useful information.

Dohplink

Thanks for your reply. I had a look on the link.
I still don't know how to proportion what's private use and what's business though.
It mentions rent but not mortgage.
Thanks

John_Pierpoint

1. Bed and Breakfast Business - LandlordZONE[IMG]chrome://searchshield/content/safe.gif[/IMG]
   
   www.landlordzone.co.uk/b&b.htm
   Running a Bed and Breakfast Business. ... Unlike a rental business, where income is classed as an investment, the B&B is a true business occupation giving the owners tax relief advantages when it comes to claiming expenses. You have the ...
4. Start your own: Bed and Breakfast | Startups[IMG]chrome://searchshield/content/safe.gif[/IMG]
   
   www.startups.co.uk › ... › Home-based businesses
   The Bed and Breakfast Association claims Britain's B&Bs generate total revenue of £2bn per year; the B&B industry is currently 28% larger than budget hotels ...
5. Will You Make Money Running a Bed and Breakfast? - Aspiring ...[IMG]chrome://searchshield/content/safe.gif[/IMG]
   
   bandb.about.com/cs/aspiring/a/make_money.htm
   How much money can you make running a bed and breakfast in your home? This article ... Gross income is income before expenses and taxes. Those need to ...
6. [PDF] Developing a Bed & Breakfast Business Plan[IMG]chrome://searchshield/content/safe.gif[/IMG]
   
   web.aces.uiuc.edu/vista/pdf_pubs/b&b.pdf
   File Format: PDF/Adobe Acrobat
   Appendix N. Planning for a Tax Audit ... Introduction. Although Bed and Breakfasts have been firmly established in Europe for years, they ... income, gaining independence and an enjoyable way of life, and perhaps, restoring an old building.
7. Small Business Tax Tips and Advice | TaxAssist Accountants[IMG]chrome://searchshield/content/safe.gif[/IMG]
   
   www.taxassist.co.uk/TaxTips/taxtips.php
   The relief can also be available for some bed & breakfast businesses too. ... claim tax relief for this loss against other income in the year, or preceding tax years..
   
   If you can post more information about your B& B business operation, it should be easier to get sensible advice for your specific circumstances.

Dohplink

Thanks for all the links. I'll start trolling through them. Any I've looked at so far don't tell you how to separate the business use from private use. How do you know who's used what electricity for instance??? If they would just give a guide of some description ie 30% it would make life easier.
Thanks anyway

jimmo

I don’t think you’ll find that sort of guidance (a defined percentage) anywhere.

Your problem is that you actually have to define your own business expenditure in your own circumstances.

If your B&B premises have 3 bedrooms, 2 for your family and 1for guests, the kitchen is used for family cooking and guest cooking and the rest of the house is open to all then it might be reasonable for you to claim 33% of your household bills.

If you have 10 bedrooms, 1 for you and 9 for guests, it could be reasonable for you to claim 90% of the household bills.

Savvy_Sue

jimmo wrote: »

I don’t think you’ll find that sort of guidance (a defined percentage) anywhere.

Your problem is that you actually have to define your own business expenditure in your own circumstances.

If your B&B premises have 3 bedrooms, 2 for your family and 1for guests, the kitchen is used for family cooking and guest cooking and the rest of the house is open to all then it might be reasonable for you to claim 33% of your household bills.

If you have 10 bedrooms, 1 for you and 9 for guests, it could be reasonable for you to claim 90% of the household bills.

Wouldn't that % depend on how many nights the OP had guests in her guest bedrooms? If she's running at 10% capacity, wouldn't the figures be lower?

chrismac1

It sounds to me that - unless you've done accounts and tax returns before - you are better off hiring an accountant, at least for year 1. You could always attempt to follow his or her work in later years.

I do the accounts for a number of Lake District B&Bs, hotels and pubs. Year 1 especially can involve some tricky tax issues as there is almost always either a solicitors' completion statement to carve up, or refurbishment and repair expenditure, or both.

The highest risk area is cash handling. You want a robust system in place to quickly be able to answer the question "Can you demonstrate that 100% of cash taken is going through the accounts?"

This may sound easy on paper, but when I tell you that I have experienced clients running a successful and highly profitable operation for 8 years who still have a £5k "black hole" in petty cash - down from £20k when I first got them and I am working on the remaining £5k! - does it still sound easy?

Get good advice now, from someone who can help you put robust systems in place and who can tell you as part of the year-end service what (if any!) areas need further improvement. Then you can relax on accounts and tax, safe in the knowledge that any call from HMRC can be dealt with swiftly and as painlessly as they ever can be.