Sole trader - taxable expenses

bluestu

quick question, appreciate any answers or a link to a thread that would have them!

Now setting up as self employed sole trader, as well as usual daytime job, just want some advice on what you can claim as taxable expenses etc, need to purchase laptop (to be kept totally for work use) software needed to carry out the job etc, will be using a room in the house and sharing phone line, purchasing stationary/filing cabinets etc.

any help much appeciated!

Stavros_3

Me too, hope you get a response

myrnahaz

It may be worth you registering voluntarily for vat so that you can reclaim the purchase tax from things you've bought for the job. It means an extra bit of work on a vat return every few months (and you'll have to charge vat to your clients), but as long as your records are accurate then it's not difficult and it means that you get the vat back on work-related items (including laptops, cabinets etc).

Indicator run a series of useful books etc, one of which gives tips and advice for which expenses can be put through the company. I don't know the title of the book (it's something obvious like 'tax tips for the small businessman'), but they have a website so you can have a look online (google 'indicator').

squawker

Before registering for VAT (if thats what you decide to do) consider who your customers are. If its non VAT registered businesses / people then you will be 17.5% more expensive.

As for expenses. As a general rule, consider whether the expenses are 100% wholly and exclusively for business use. If the answer is yes, its likely that these expense will be treated as tax deductable.

I suggest you visit an accountant, they should be able to provide the advice you need and tax return assistance.

danrees

The general principle in tax law is that any expenses need to be 'wholly and exclusively for the purposes of the trade', in order to be tax deductible.

Therefore to the extent that you can demonstrate this then the expenditure should be tax deductible. However, for items such as laptops etc it is going to be difficult to argue that they are 100% for business use. Stationary and business software should be no problem.

For the laptop, you will be entering the wonderful world of capital allowances. You won't be able to claim 100% of the cost of the computer as tax-deductible, but instead the tax relief will be provided at 25% on a reducing balance basis (i.e. in the 2nd year the relief will be 25% x 75% of the cost)

Sully316

Im an accountant in practice. The first thing I would say is that you need to register as self employed with HMRC, as if you do not register within 3 months of your start date of trading you will get £100 fine.

You can put the laptop through your books, but please make sure you keep ALL your receipts for items you purchase for business use, i.e. Software and put them in a boxfile or something.

As for using your home, you can put through your accounts a provision for "use of home as office" which is to cover for any electricity, heating etc that you will have used to carry out your business affairs at home. The amount that gets put through is dependant on how much income your generating. The more you use your home, the more you can put through. Please bare in mind though that I am not talking thousands of pounds here though.

If you want any more advise, please pm me. Cheers.

hopon

Sully316 wrote: »

Im an accountant in practice. The first thing I would say is that you need to register as self employed with HMRC, as if you do not register within 3 months of your start date of trading you will get £100 fine.

You can put the laptop through your books, but please make sure you keep ALL your receipts for items you purchase for business use, i.e. Software and put them in a boxfile or something.

As for using your home, you can put through your accounts a provision for "use of home as office" which is to cover for any electricity, heating etc that you will have used to carry out your business affairs at home. The amount that gets put through is dependant on how much income your generating. The more you use your home, the more you can put through. Please bare in mind though that I am not talking thousands of pounds here though.

If you want any more advise, please pm me. Cheers.

The amount that gets put through for use of home as office has nothing to do with the level of income. A one room office in a house costs the same to heat etc whether the sales invoices that are raised are for £2000 or £200000.

longforgotten

Use of home..I thought it was more like, add up gas,elec , rates etc for the year , divide by number of rooms in the house = one office ?

bluestu

thanks for the answers given, been reading thru hmrc website for what seems like weeks!
got most things sussed now, and have registered to do one of the tax offices free courses

My laptop i bought is solely to run business software on, as i want to keep things completely separate from personal PC etc, so am happy that will be ok.

is the capital allowance amount deducted from the tax bill or deducted from the taxable profits??

Need a filing cabinet to store all paperwork in, again purely for the business, is this a capital allowance or an expence?

I will be claiming the amap mileage rate as i run an older car, is there a similar scheme for working from home rather than gathering all household expences and working out the percentage, ie a weekly allowance?

thanks guys!

nimjacole

We are in a similar situation my husband has set up as sole trader ltd company and myself as company secretary we have set up a similar company however we worked a broad for a long time since we have come back to UK to set up another company but law have changed since. I am stuck on whether my husband is able to claim mileage we realise for the first 12,000 40ppm thereafter 25 ppm. We run our company from our home address in a designated office in our house, everything is kept separate from personal. My husband is travelling from his home to different places around the uk and therefore his mileage is quite high. Does he claim for the mileage which includes petrol costs at 40ppm inclusive or does this constitute communting to his place a work which if it does are we are able to claim mileage for each occasion or not just his expenses in doing so i.e. petrol. He travels in excess sometimes of 250 miles a day!

trevor_john

A sole trader Ltd Company.........You must be one or the otherr unless i am abbout to be corrected lol.