Self-employed taxes and expenses in first year?

LannieDuck

Notmyrealname wrote: »

Claiming the flat rate for the property of £150 unless you use a room such as second bedroom as an office solely for business use, and 50% of utility bills.

...so a self-employed person who lives and works in a one-bed flat can claim £150 back in tax a year, along with 50% of utilities?

That's potentially quite significant if utilities are high, and quite different from all the comments saying you can't claim anything if you live in the flat as well as work.

lovinituk

LannieDuck wrote: »

...so a self-employed person who lives and works in a one-bed flat can claim £150 back in tax a year, along with 50% of utilities?

That's potentially quite significant if utilities are high, and quite different from all the comments saying you can't claim anything if you live in the flat as well as work.

I'm not commenting on the figures quoted as I don't know (see an accountant ) but you don't actually 'claim back' the amount. It is an expense that is offset against your earnings so in real terms it just means that you don't pay tax on that amount. So if the expense was £150 it means you would save £30 in tax (20% of £150).

I find it amusing when I hear people say that they bought something through the business so it didn't cost them anything because they are claiming it back in tax! They don't actually realise that they have only effectively saved 20% of the cost.

Notmyrealname

sanjj wrote: »

Hi

I worked as selfemployed last year for the first time and earned a net income of £42000 and i think i have to pay total amount of tax £10,034.75. could you tell me how can i pay less tax legally by not decreasing my net income please.....


Thanks

Limited Company. Draw income as dividends. You may not save a whole load on income tax but you'll save on NI.

Notmyrealname

LannieDuck wrote: »

...so a self-employed person who lives and works in a one-bed flat can claim £150 back in tax a year, along with 50% of utilities?

That's potentially quite significant if utilities are high, and quite different from all the comments saying you can't claim anything if you live in the flat as well as work.

Not 50% of all utilities but 50% of phone, broadband, mobile phone. The flat rate includes gas/electric/water etc.

I have a workshop I work out of. Making sure I have claimed everything possible, I have to have a turnover of approx £50k a year before I get to the point I need to pay income tax. I put in the bank far more than I would if I were an employee earning £8k a year. No books are cooked, there are receipts for everything, proof of all the mileage I claim. However it is a fair whack of work and I'm lucky that I know someone who specialises in tax. You need to find someone who specialises in tax, not just any accountant. Like law, there's several fields to accountancy.

LannieDuck

lovinituk wrote: »

I'm not commenting on the figures quoted as I don't know (see an accountant ) but you don't actually 'claim back' the amount. It is an expense that is offset against your earnings so in real terms it just means that you don't pay tax on that amount. So if the expense was £150 it means you would save £30 in tax (20% of £150).

I find it amusing when I hear people say that they bought something through the business so it didn't cost them anything because they are claiming it back in tax! They don't actually realise that they have only effectively saved 20% of the cost.

Thanks, I was being lazy with my language and that's an important distinction.

LannieDuck

Notmyrealname wrote: »

Not 50% of all utilities but 50% of phone, broadband, mobile phone.

Ahh, gotcha. Thanks.

Jew

Thanks for clarifying

Notmyrealname wrote: »

The flat rate includes gas/electric/water etc.

LOL, the flat rate doesn't include squat :P

So weird how it's so low...

sanjj_2

Notmyrealname wrote: »

Limited Company. Draw income as dividends. You may not save a whole load on income tax but you'll save on NI.

Thanks for reply........How i can draw income as dividends if there is no company and how i can save on NI please...........

lovinituk

sanjj wrote: »

Thanks for reply........How i can draw income as dividends if there is no company and how i can save on NI please...........

You can't draw dividends and you have to pay NI if there is no company.

Jew

These HMRC websites suggest that I could take 50% of what I pay for a studio and pass it off as business expense since it'll be used for business more than 50% of the day there.

http://www.hmrc.gov.uk/manuals/bimmanual/BIM47825.htm (example 6)
http://www.hmrc.gov.uk/manuals/bimmanual/bim47820.htm
http://www.hmrc.gov.uk/manuals/bimmanual/BIM47815.htm

"The extent of business use is a question of fact. Enquiries are only likely to be worthwhile where the amount claimed is significant and appears to be inconsistent with the nature of the taxpayer’s business.

Different traders organise their businesses in different ways. There is no fixed proportion of costs allowable in a particular type of business. Although the same type of business conducted in the same way may be expected to result in similar deductible amounts.

The factors to be taken into account when apportioning an expense include:

Area: what proportion in terms of area of the home is used for business purposes?
Usage: how much is consumed? This is appropriate where there is a metered or measurable supply such as electricity, gas or water.
Time: how long is it used for business purposes, as compared to any other use?"

As someone who'd work long hours from home, I think that'd qualify. Perhaps I could refine the specific hours to be more accurate (just estimates at this point).