Tax advantages of being self-employed

Here is a summary of the main tax advantages of self-employment:

Expenses to Claim

• The cost of any goods or services you use fully for your business can be deducted from your sales revenue for tax purposes. Where an item is used partially for your business and partly for private purposes, such as your private car or home, you can claim the business proportion of the costs against your business profits. However, you must be able to justify the business proportion with evidence such as the miles driven, or space used by the business.

• Capital allowances – if you purchase an item that is expected to last several years, such as a van, you can claim a special deduction known as a capital allowance. The first £100,000 you spend on equipment each year qualifies for 100% capital allowances in the year of purchase. This does not include cars.

• Loan interest – if you take out a business loan the interest paid on that loan can be deducted from your sales revenue. The loan must be taken out to fund your business, rather than a personal loan or credit card borrowings.

Government Support

• Government funding – if you live in an area in the UK that has been designated as a regeneration area you may qualify for a government funded programme to help people start their own businesses.

• Charitable support is also available from the Prince’s Trust throughout Britain for those aged 18 to 30 who wish to start their own business.

• Self-employed credit – if you have been registered as unemployed for at least six months you may qualify for a self-employed credit of £50 per week if you start your own business. Ask at your local Jobcentre Plus office for more details.

• Working and child tax credits – You may qualify for these while you run your own self-employed business. Your tax credit award is based on your family’s joint income including your self-employed profits, but it will also be determined by the number of hours worked by the adults in the family, and the number of children aged under 16.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.