Tax return deadline: what traders need to know around deductible expenses?
Regardless of whether you carry out the self-assessment yourself or use an accountancy firm, if you’re a self-employed professional in the biomass and solid fuel and heating appliance industry it’s important to be aware of what you could potentially declare as a tax deductible expense. Ahead of the online deadline of 31 January for self-assessment tax returns, Which? Trusted Traders looks at the expenses self-employed traders should be aware of and claiming against.
You can claim expenses against your tax bill – but not all business expenses qualify, so it’s important to make sure your claim is valid. In general, unless something you buy for your business is a capital asset- such as a computer or machinery (which you claim for under different rules) – you can deduct its full cost when working out your taxable profits and you get immediate tax relief for the full amount.
So what is tax deductible: You are not permitted to claim for non-business or personal expenditure, so it’s important to keep accurate records throughout the year. Allowable expenses that are tax deductible include:
· Professional fees: including accountancy, legal and professional indemnity insurance
· Advertising: any promotion of your business in newspapers, through mailshots and on your website
· Bank, credit card and financial expenses: including overdraft and credit card charges, hire purchase and leasing payments
· Communications and office costs: including phone, mobile, internet, postage, stationery printing and computer software
· Car and van expenses: including insurance, repairs, servicing, fuel, parking, and your business AA/RAC membership
· Cost of goods you are going to sell: such as the cost of raw materials and the direct cost of producing goods
· Energy: including light, heat and power (if you use a home as office you need to only claim against the business proportion)
· Insurance: as long as it is a business specific policy
· Interest: on any bank loans or other business loans
· Property costs: including insurance and security for business premises
· Rent: on any business premises
· Travel expenses: including train, bus, air and taxi fares, hotel costs and meals on overnight business trips
· Wages and staff costs: including salaries, pensions, staff benefits, and employers’ NICs
What about capital assets: Capital or fixed assets such as equipment, machinery, computers, or vans are permitted on items you use in your business that have a useful life of more than two years. If you are registered for VAT, you can only claim capital allowances on the net cost of the asset, excluding the VAT. If you are not registered for VAT, you can claim capital allowances on the total cost, including VAT.
For further help with your income tax bill or to use the Which? tax calculator for free please visit: money.which.co.uk/tax-calculator
For further information on becoming a Which? Trusted Traders please visit: trustedtraders.which.co.uk/for-traders or call: 020 3603 5701 (don’t forget to mention your are HETAS registered)