Self Employed - claiming expenses when not paying income tax?

PJM_62

My daughter has just started her own small business (sole trader).
She's probably only going to turnover about 10k. And that will be her only income.
She's asked me a question about claiming expenses like the 45p per mile for mileage and for business equipment purchases.
Never having been self employed, or done self assessment, its not an area I know much about really.
What I cant figure out is an answer to the question .. Can she still claim for mileage, equipment , workwear, etc, if she is not going to be paying any income tax because her income is less than the personal allowance (12k?).
Thanks in advance for any advice.

BoGoF

She can still claim expenses but it won't make any difference to the tax position. It could affect her liability to Class 4 NIC though as that threshold is lower- £8424 for 2018/19.

PJM_62

Thanks BoGof. I'll read up about the NIC situation. Hadnt thought of that.

Seems a bit harsh that because her income doesnt quite reach the income tax level, she has to pay for all her own business related fuel etc, whereas someone earning a few £k more will effectively have it paid for. And the 45p per mile thats paid as expenses is probably 30p per mile more than the fuel costs.
Or am I missing something?

Linton

PJM_62 wrote: »

Thanks BoGof. I'll read up about the NIC situation. Hadnt thought of that.

Seems a bit harsh that because her income doesnt quite reach the income tax level, she has to pay for all her own business related fuel etc, whereas someone earning a few £k more will effectively have it paid for. And the 45p per mile thats paid as expenses is probably 30p per mile more than the fuel costs.
Or am I missing something?

Someone earning a few £K more won't have their fuel paid for, they will just not have to pay tax on it. But your daughter doesnt pay tax anyway,.

nick74

PJM_62 wrote: »

Thanks BoGof. I'll read up about the NIC situation. Hadnt thought of that.

Seems a bit harsh that because her income doesnt quite reach the income tax level, she has to pay for all her own business related fuel etc, whereas someone earning a few £k more will effectively have it paid for. And the 45p per mile thats paid as expenses is probably 30p per mile more than the fuel costs.
Or am I missing something?

'Claiming expenses' in this context just means offsetting those expenses against income before the tax is calculated. It doesn't mean the government/HMRC pay you money for your expenses!

redpete

PJM_62 wrote: »

Thanks BoGof. I'll read up about the NIC situation. Hadnt thought of that.

Seems a bit harsh that because her income doesnt quite reach the income tax level, she has to pay for all her own business related fuel etc, whereas someone earning a few £k more will effectively have it paid for. And the 45p per mile thats paid as expenses is probably 30p per mile more than the fuel costs.
Or am I missing something?

Yes, you are missing something. No-one gets 45p per mile paid to them by HMRC. They can offset these expenses against their tax liability; so if they are paying 20% tax on their income they will be 20% * 45p per mile better off, about 9p per mile. If they pay no tax there is no liability to offset. The 45p is meant to cover all costs of running a car; in my case the cost is about 25p per mile (fuel, tyres, maintenance...) and on top of this there are expenses such as insurance and car tax that are fixed regardless of miles driven.

It would seem harsh if you expect me (as a taxpayer) to contribute towards your daughter's expenses incurred in earning money.

Dazed_and_confused

It's always surprising the number of employed people using their own car for business purposes who post on here under the impression that HMRC will pay the difference between the mileage rate their employer pays and the tax free 45p rate.

Never sure if the employers are accidentally on purpose misleading them to divert from the fact that they are only paying say 10p/mile or if is the posters just misunderstanding things.