Self-employed expenses that are tax-deductible

Thread starter #1
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Just need a bit of guidance on this. I've been reading HMRC website - and it tells me formally - but if I can ask the forummers about some specifics as it's still not totally clear to me what he can claim as business expenses.

Quite simple scenario really,

My son works from home as a Sole-Trader in the events sector (only very recently registered so actually late for the tax year in question...but we'll see on that). He travels to venues around the North of England - with an occasional longer trip south.

I know that he should be able to claim some of the household and his personal running costs as business expenses against his taxable profit. But what are reasonable metrics to use. 50% of gas, electricity, mobile phone, internet bills? Obviously there is a personal aspect to all of these costs but what about the business aspect? These monthly costs are known so easy to work out a ££ - but what % to use?

For Tax year 2018-19 for which we are going to be doing the SA Return next week (hopefully no penalty...but that aside). He did not use a car for business - all public transport so that's quite easy...Can he claim a per diem amount for sustenance for every day working away? And what about clothing? For him it would be as simple as a pair of trainers, two pairs of trousers, couple of decent shirts and a jacket. So total cost for him would be let's say £200.

Laptop and printer. We bought him these about 3 years ago so not in the 18/19 Tax Year - but could he claim these as business expenses - he can't do his job without them.

We're not out to diddle the tax man in any way - but just want to help him claim business expenses that are reasonable so that he doesn't pay more tax than he has to
 

jim8flog

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As an aside it is worth checking the covenants on the house. Many houses have covenants on them that prohibit any sort of use for business.

My experience relates to too long ago so probably not of use now. (the Trade Union negotiated the %s to use with the Inland Revenue)
 

drdel

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Anything he can 'hand-on-heart' say was spent on his business activities. Get and keep ALL record receipts, even fast food and casual stuff (£10 per week will give you a £500 deduction over the year; which on the income you mentioned could be worth having. Clothing may be debatable unless its specialised work-wear. Household expenses would/could be argued on floor space: more than 20% might raise eyebrows in the tax office. Stationery etc all allowable with receipts - you might buy a few things as ad hoc but don't be tempted to 'push' it. HMRC has access to statistics and so can see the average costs etc for small businesses so can easily spot something that's out of the ordinary.

Most everyday priced Computer equipment can written in 1 year so is fully tax deductable. Other capital expenditure would normal be on a declining value (about 20% per year) but depends on the item - HMRC site is the best listing. Business bank expenses charges all are deductable.

Keep ahead of what the future annual bill might be and put it to one side - hard but it will avoid future pain!!
 
Thread starter #4
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As an aside it is worth checking the covenants on the house. Many houses have covenants on them that prohibit any sort of use for business.

My experience relates to too long ago so probably not of use now. (the Trade Union negotiated the %s to use with the Inland Revenue)
He rents and the business activity from the house is just internet, telephone and Email.
 

Grant85

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Just need a bit of guidance on this. I've been reading HMRC website - and it tells me formally - but if I can ask the forummers about some specifics as it's still not totally clear to me what he can claim as business expenses.

Quite simple scenario really,

My son works from home as a Sole-Trader in the events sector (only very recently registered so actually late for the tax year in question...but we'll see on that). He travels to venues around the North of England - with an occasional longer trip south.

I know that he should be able to claim some of the household and his personal running costs as business expenses against his taxable profit. But what are reasonable metrics to use. 50% of gas, electricity, mobile phone, internet bills? Obviously there is a personal aspect to all of these costs but what about the business aspect? These monthly costs are known so easy to work out a ££ - but what % to use?

For Tax year 2018-19 for which we are going to be doing the SA Return next week (hopefully no penalty...but that aside). He did not use a car for business - all public transport so that's quite easy...Can he claim a per diem amount for sustenance for every day working away? And what about clothing? For him it would be as simple as a pair of trainers, two pairs of trousers, couple of decent shirts and a jacket. So total cost for him would be let's say £200.

Laptop and printer. We bought him these about 3 years ago so not in the 18/19 Tax Year - but could he claim these as business expenses - he can't do his job without them.

We're not out to diddle the tax man in any way - but just want to help him claim business expenses that are reasonable so that he doesn't pay more tax than he has to
I am also self-employed so have been through the SA process a number of times. Albeit I get an accountant to do my books.

I don't see an issue with claiming 50%. At these levels I can't imagine anyone is going to quibble. Can also claim a %age of council tax - I guess it might have to be in his name though.

My understanding is you can't claim a sustenance amount each day, but if you are displaced (i.e. away from your place of work / home) you can claim your meals, hot drinks, etc). But receipts required. This is certainly what I do and I keep all my receipts for food and drinks if I'm out of the office for work.

Clothing - this is fairly simple. You can only claim clothing if it garments that are required for safety or a specific uniform that you would not wear outside of work. Normal street or business dress cannot be claimed on. This is a very frustrating part of the tax system - especially people that wear business suits for work and never at any other time - but the rules are fairly clear.

I guess a loophole would be to get some clothes and get a logo stitched on, which I believe would allow them to be claimed upon - albeit you'd need to work out if it was worth the extra cost / hassle. There may be other loopholes for people who need outdoor clothes - waterproof jacket / shoes, maybe this counts as specialist? I'm not sure, but I'd guess a golf pro is claiming for his footjoys and galvins.

With regards to hardware... you can add the depreciation of these in. So if you had a laptop that was worth £500 when he started working, there is a forumla for the depreciation of this over the tax year. But you likely need to estimate what it was worth at the time he went S/E. I did this for my car and got a few autotrader page graps of same car with similar mileage.
 
Thread starter #6
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Anything he can 'hand-on-heart' say was spent on his business activities. Get and keep ALL record receipts, even fast food and casual stuff (£10 per week will give you a £500 deduction over the year; which on the income you mentioned could be worth having. Clothing may be debatable unless its specialised work-wear. Household expenses would/could be argued on floor space: more than 20% might raise eyebrows in the tax office. Stationery etc all allowable with receipts - you might buy a few things as ad hoc but don't be tempted to 'push' it. HMRC has access to statistics and so can see the average costs etc for small businesses so can easily spot something that's out of the ordinary.

Most everyday priced Computer equipment can written in 1 year so is fully tax deductable. Other capital expenditure would normal be on a declining value (about 20% per year) but depends on the item - HMRC site is the best listing. Business bank expenses charges all are deductable.

Keep ahead of what the future annual bill might be and put it to one side - hard but it will avoid future pain!!
Many thanks - just the guidance I was hoping for...and so very much appreciated. He does have all the invoicing for the tax year but has nothing in respect of receipts for food and tickets for buses and trains.

He has business outgoings (artist fees and other artist costs) to take off his top-line business income - some of which he has records of but not all. I'm assuming we take all the business-related expenses of the sort you have advised on here off his profit after these business outgoings are deducted. Then take of £12.5k - and he gets taxed on what remains (not sure yet how and when NI payments come into things but I'll look into that)

But the truth is that it isn't going to be much, as his income after artist fees and other artist costs comes to about £14,250 for that year. Take off £12.5k and we're down at £1,750 taxable income for the year 20% of that is £350. However with laptop, printer and a small amount of household and personal costs I think I can reasonably get taxable income down to maybe £500 (guess). And tax on that he can afford.

Once he has this all set up and he knows what he has to do for next year things will be a lot easier....
 
Thread starter #7
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I am also self-employed so have been through the SA process a number of times. Albeit I get an accountant to do my books.

I don't see an issue with claiming 50%. At these levels I can't imagine anyone is going to quibble. Can also claim a %age of council tax - I guess it might have to be in his name though.

My understanding is you can't claim a sustenance amount each day, but if you are displaced (i.e. away from your place of work / home) you can claim your meals, hot drinks, etc). But receipts required. This is certainly what I do and I keep all my receipts for food and drinks if I'm out of the office for work.

Clothing - this is fairly simple. You can only claim clothing if it garments that are required for safety or a specific uniform that you would not wear outside of work. Normal street or business dress cannot be claimed on. This is a very frustrating part of the tax system - especially people that wear business suits for work and never at any other time - but the rules are fairly clear.

I guess a loophole would be to get some clothes and get a logo stitched on, which I believe would allow them to be claimed upon - albeit you'd need to work out if it was worth the extra cost / hassle. There may be other loopholes for people who need outdoor clothes - waterproof jacket / shoes, maybe this counts as specialist? I'm not sure, but I'd guess a golf pro is claiming for his footjoys and galvins.

With regards to hardware... you can add the depreciation of these in. So if you had a laptop that was worth £500 when he started working, there is a forumla for the depreciation of this over the tax year. But you likely need to estimate what it was worth at the time he went S/E. I did this for my car and got a few autotrader page graps of same car with similar mileage.
Interesting thing about clothes is that he has to dress fairly smartly for work as he is the venue representative for a couple of artist management companies he does work for - and he dresses in a way that he would never normally dress - so even though to you or I what he wears we might wear casually or indeed on the golf course - he wouldn't :)

His laptop, printer and a DJ deck were bought for him (by us) as he needed them but didn't have money to buy them...could they look for receipts? I don;t have them. BTW - we are his #1 Creditor so all of that stuff we could reasonably declare as debts.
 

Grant85

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Interesting thing about clothes is that he has to dress fairly smartly for work as he is the venue representative for a couple of artist management companies he does work for - and he dresses in a way that he would never normally dress - so even though to you or I what he wears we might wear casually or indeed on the golf course - he wouldn't :)

His laptop, printer and a DJ deck were bought for him (by us) as he needed them but didn't have money to buy them...could they look for receipts? I don;t have them. BTW - we are his #1 Creditor so all of that stuff we could reasonably declare as debts.
Yes - it does seem pretty unfair. I guess the comparison is that people who are employed would be expected to buy and wear their own clothes at work, even if it's business dress or they buy smart / practical clothes they wouldn't normally.

I dread to think what it would cost the tax system if they gave everyone tax relief on clothes, even just up to £200 or so.
 
Thread starter #9
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Yes - it does seem pretty unfair. I guess the comparison is that people who are employed would be expected to buy and wear their own clothes at work, even if it's business dress or they buy smart / practical clothes they wouldn't normally.

I dread to think what it would cost the tax system if they gave everyone tax relief on clothes, even just up to £200 or so.
If his Newton Mearns granny was still with us she’d have sorted him out from the word go...no messing 😊
 

Leftie

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Many years since I had to worry about such things so might be a bit out of date but I would be surprised if he would get much (if any) relief on computer, printer and internet as these could be (and probably are) for personal use as well (ahem... I seem to recall something about not watching "live television ........). Receipts in his own name might have helped to claim a bit of relief. I would also suggest that clothing might be a non-starter as well. I couldn't even claim for the cleaning of mine even though the nature of the job meant that it could get filthy/ruined on a frequent basis.
 

GreiginFife

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Many thanks - just the guidance I was hoping for...and so very much appreciated. He does have all the invoicing for the tax year but has nothing in respect of receipts for food and tickets for buses and trains.

He has business outgoings (artist fees and other artist costs) to take off his top-line business income - some of which he has records of but not all. I'm assuming we take all the business-related expenses of the sort you have advised on here off his profit after these business outgoings are deducted. Then take of £12.5k - and he gets taxed on what remains (not sure yet how and when NI payments come into things but I'll look into that)

But the truth is that it isn't going to be much, as his income after artist fees and other artist costs comes to about £14,250 for that year. Take off £12.5k and we're down at £1,750 taxable income for the year 20% of that is £350. However with laptop, printer and a small amount of household and personal costs I think I can reasonably get taxable income down to maybe £500 (guess). And tax on that he can afford.

Once he has this all set up and he knows what he has to do for next year things will be a lot easier....
Ok, as pointed out before the tax free allowance for 2018/2019 was NOT £12500. It was £11850 for that period.
The period 2019/2020 is £12500. This information is available on HMRCs website.
 

jim8flog

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:)
His laptop, printer and a DJ deck were bought for him (by us) as he needed them but didn't have money to buy them...could they look for receipts? I don;t have them. BTW - we are his #1 Creditor so all of that stuff we could reasonably declare as debts.
It used to be that you could claim depreciation and running costs on items like that but not the original cost.
 

Lord Tyrion

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Nobody has mentioned this but I can't help thinking that it is worth paying for 30 minutes of a local accountants time to set out the precise rules relating to his circumstances. If it can a/ save him money and b/ keep him straight and legal, then it will be money well spent. Just make sure that you speak to someone who is on the ball for this issue.
 
Thread starter #14
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Nobody has mentioned this but I can't help thinking that it is worth paying for 30 minutes of a local accountants time to set out the precise rules relating to his circumstances. If it can a/ save him money and b/ keep him straight and legal, then it will be money well spent. Just make sure that you speak to someone who is on the ball for this issue.
As it happens there is a charity I’ve already spoken with on getting him registered as a sole trader that employs accountants to advise those whose incomes are less than £20k - I hadn't reached the point of seeking their advice on allowable expenses as thought it would be easy - but think I will. 👍
 

Stuart_C

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Just need a bit of guidance on this. I've been reading HMRC website - and it tells me formally - but if I can ask the forummers about some specifics as it's still not totally clear to me what he can claim as business expenses.

Quite simple scenario really,

My son works from home as a Sole-Trader in the events sector (only very recently registered so actually late for the tax year in question...but we'll see on that). He travels to venues around the North of England - with an occasional longer trip south.

I know that he should be able to claim some of the household and his personal running costs as business expenses against his taxable profit. But what are reasonable metrics to use. 50% of gas, electricity, mobile phone, internet bills? Obviously there is a personal aspect to all of these costs but what about the business aspect? These monthly costs are known so easy to work out a ££ - but what % to use?

For Tax year 2018-19 for which we are going to be doing the SA Return next week (hopefully no penalty...but that aside). He did not use a car for business - all public transport so that's quite easy...Can he claim a per diem amount for sustenance for every day working away? And what about clothing? For him it would be as simple as a pair of trainers, two pairs of trousers, couple of decent shirts and a jacket. So total cost for him would be let's say £200.

Laptop and printer. We bought him these about 3 years ago so not in the 18/19 Tax Year - but could he claim these as business expenses - he can't do his job without them.

We're not out to diddle the tax man in any way - but just want to help him claim business expenses that are reasonable so that he doesn't pay more tax than he has to
Iirc you can claim 5% for gas,water,electric, broadband but only if he has a dedicated room in the house as a office.

I wouldn’t be worried about diddling the tax man, it’s ok for the MP’s and multi billion pound companies to do so.😉
 
Thread starter #17
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Dont let him forget to pay his NI stamp.
Even paying the basic figure on very low income counts as working years for if and when he gets to retirement age.
He only earned something like £500 a month from his sole trader activities and from what I understand from the HMRC website the Cat 2 NI contributions kick in at just over £6.2k a year - so he didn't quite get to that threshold - hopefully he will this year. He pays standard NI contributions through his employed work on a PAYE basis.
 

Bunkermagnet

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He only earned something like £500 a month from his sole trader activities and from what I understand from the HMRC website the Cat 2 NI contributions kick in at just over £6.2k a year - so he didn't quite get to that threshold - hopefully he will this year. He pays standard NI contributions through his employed work on a PAYE basis.
That might be the "kick in" figure, but by not paying any NI, it's not counting as worked that year. That in time could affect the state pension amounts he may get (assuming there still is one by then).
You have to play them at their own game if you want to survive later on;)

Sorry, just noticed the last sentence. Thats ok then :)
 
Thread starter #20
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That might be the "kick in" figure, but by not paying any NI, it's not counting as worked that year. That in time could affect the state pension amounts he may get (assuming there still is one by then).
You have to play them at their own game if you want to survive later on;)

Sorry, just noticed the last sentence. Thats ok then :)
So - as long as he is paying NI contributions of some sort he’s OK on the state pension front. I hadn’t thought that you only had to pay something to qualify and that the actual amount is irrelevant. That’s good then.
 
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