Self-employed expenses that are tax-deductible

[pendodave]

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.

Please get this confirmed officially. It's likely to have more far reaching consequences than any tax rebates that he's misses out on.
It's a bit boring, and I understand that he might have reached his current working arrangements by accident, but being professional (and playing for professional advice) is going to take a lot of pointless worry out of his life moving forward. Allow him to concentrate on the important stuff.

 

[williamalex1]

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.

I think you need to have paid 35 years of N.I contributions to receive the full state pension, less than 35 years the pension will be reduced .

 

[SwingsitlikeHogan]

I think you need to have paid 35 years of N.I contributions to receive the full state pension, less than 35 years the pension will be reduced .

That bit I am aware of as my wife took time off when we had children and retired at 57 - and as a result is a bit short of the necessary 35yrs. Predicted to get about £135/week. Could have paid to catch up but didn't - not sure we could contribute more now - but as she is back working then the deficit will be reduced a little.

 

[jim8flog]

That bit I am aware of as my wife took time off when we had children .

That bit is not important, dependent on the childrens age, as she would have got home responsibilities protection (at least that is what is was called when I last checked).

 

[Deleted member 1147]

A few points:
you can claim expenses if they are incurred wholly, necessarily and exclusively for the purposes of trade.

If working from home you can either claim a set use of home allowance (google it, approx £4 per week), or the extra cost incurred from working at home (ie increase in light & heat costs). Any fixed costs, such as rates are essentially entirely private, as their cost isn’t affected by working from home.

Travel can be claimed at 40p per mile for the first 10k miles, in own car. Public transport is claimable as incurred.

Assets can be claimed under capital allowances, 100% in first year. But if owned prior to trade beginning can claim18% per annum on reducing balance basis.

Clothing can only be claimed on PPE, other “normal “ clothing can have duality of purpose. Therefore is unlikely to be accepted.

 

[Deleted member 1147]

If not paying any NI you can voluntarily pay class 2 NIC via the tax return. A full year is approx £154.
he may have a full year’s contribution via class 1 as an employee.

He can check his NI status if he logs into his personal tax account on HMRC s website

 

[AMcC]

I am also a sole trader working from home and also get an accountant to do my books. I have a spread sheet set up with income and expenditure for each month. Can't rally add much than what the others have already said, except, I would advise him to get a bank account and put all his expenses through that, makes it much easier to separate business and personal income / expenditure

 

[SwingsitlikeHogan]

If not paying any NI you can voluntarily pay class 2 NIC via the tax return. A full year is approx £154.
he may have a full year’s contribution via class 1 as an employee.

He can check his NI status if he logs into his personal tax account on HMRC s website

He has only in the last week or so registered as a sole trader - though he will have some NI record as he has had quite a few periods of paid employment over the last 5-6yrs after uni. Might well be worthwhile him looking into his NI record to see how big the gaps in his record are and what the cost would be if he were to look to fill these gaps. I see that for Class 2 NICs it is fixed at £3/week.

 

[SwingsitlikeHogan]

I am also a sole trader working from home and also get an accountant to do my books. I have a spread sheet set up with income and expenditure for each month. Can't rally add much than what the others have already said, except, I would advise him to get a bank account and put all his expenses through that, makes it much easier to separate business and personal income / expenditure

Cheers for that. We have discussed this and he has separate 'pots' set up in a Monzo bank account for his business and personal transactions. We are working out how best to record all transaction on the spreadsheet I have set up for him and then how best to manage taking income from the business pot into the personal pot.

Many thanks again for the pointers...

 

[SwingsitlikeHogan]

A few points:
you can claim expenses if they are incurred wholly, necessarily and exclusively for the purposes of trade.

If working from home you can either claim a set use of home allowance (google it, approx £4 per week), or the extra cost incurred from working at home (ie increase in light & heat costs). Any fixed costs, such as rates are essentially entirely private, as their cost isn’t affected by working from home.

Travel can be claimed at 40p per mile for the first 10k miles, in own car. Public transport is claimable as incurred.

Assets can be claimed under capital allowances, 100% in first year. But if owned prior to trade beginning can claim18% per annum on reducing balance basis.

Clothing can only be claimed on PPE, other “normal “ clothing can have duality of purpose. Therefore is unlikely to be accepted.

We have to look at how he manages travel by car as he normally gets an upfront allowance to cover his costs - including travel - and those of the artist. And at the end of a tour he will pay back (to the tour management company) the balance remaining and then invoice them for his work.

I haven't yet sorted out in my head if I have to do anything in his SA Tax return in respect of the travel/fuel costs and subsistence allowance that he takes out of the upfront allowance. I don't think so as although it is all business expense - it is all expensed and so he does not make anything out of it and at the end of a tour will not submit any expenses claims to the company. As his fuel is all paid for I can't see then how he could set anything against his income in respect of a business mileage allowance - except I am thinking that what he gets expensed is just fuel...can he therefore claim business mileage against income at the lower rate - for such as wear and tear and other car ownership costs - or is it the difference between the higher rate (using own car) and the lower rate (using company car).

[EDIT] Or maybe what he uses of the upfront allowance for fuel counts as personal income and he claims 40p/mile as tax deductable business expense against his personal income when doing his tax return...dunno... I feel a call into the TaxAid Charity (for individuals with low income) coming soon. Must get all my questions lined up.

 

[AMcC]

Cheers for that. We have discussed this and he has separate 'pots' set up in a Monzo bank account for his business and personal transactions. We are working out how best to record all transaction on the spreadsheet I have set up for him and then how best to manage taking income from the business pot into the personal pot.

Many thanks again for the pointers...

All I do is have two tabs on my spreadsheet and record each month and how much income I get and the date received. the second tab is for expenditure and I tend to leave that until year end and download my bank statement as a csv and dump it straight in to the expenditure tab. But also keep all my receipts and add in anything I had paid cash for. Using a debit card all the time for all purchases makes this so much easier, even a few pounds postage gets paid by card. Fell free to pm if you have anything else to ask.

 

[Mudball]

While business clothing (suits) may not be allowed, he may be able to claim laundry bill. Worth a check.

 

[roseklee]

Even if he pays a little more taxes than necessary, it will still affect his pension. So if you are not losing a lot of money, then what is the problem?I sometimes go to the USA and I used to live and work there. There people pay taxes on the W2 form and this is convenient because you can always see how much taxes you have deducted to the state, roughly calculate your future pension. Once I decided to estimate how much I paid taxes before filling out the W2 form and calculated it in advance on https://www.thepaystubs.com/w2-form-generator and I realized that I had overpaid a lot, but I decided to leave everything as it is, because I believe that I need to think about the future, I want to have a decent pension.

 

[SwingsitlikeHogan]

Even if he pays a little more taxes than necessary, it will still affect his pension. So if you are not losing a lot of money, then what is the problem?

Sorry…not sure which issue or question you have responded to here - it’s been a while.

My OP was pre-pandemic and a lot of water has flowed under his bridge since then. Things are looking up since venues and night clubs have opened up…and as part of his income is a small p/t paye salaried job he it’s likely to be paying NI contributions - but I’ll check with him so that he can start voluntary contributions if he isn’t.

 

[williamalex1]

Sorry…not sure which issue or question you have responded to here - it’s been a while.

My OP was pre-pandemic and a lot of water has flowed under his bridge since then. Things are looking up since venues and night clubs have opened up…and as part of his income is a small p/t paye salaried job he it’s likely to be paying NI contributions - but I’ll check with him so that he can start voluntary contributions if he isn’t.

I seem to remember you need 35 years of NI contributions to receive the full state pension.
You can buy back missed years, if not the pension will be reduced accordingly.
You can call the NI and ask for a pension forecast, at anytime.

 

[Lord Tyrion]

I seem to remember you need 35 years of NI contributions to receive the full state pension.
You can buy back missed years, if not the pension will be reduced accordingly.
You can call the NI and ask for a pension forecast, at anytime.

I think you can do that check online now. Much easier than trying to get through on a phoneline. Your point still stands though, good to check these things out ?

 

[Tashyboy]

I think you can do that check online now. Much easier than trying to get through on a phoneline. Your point still stands though, good to check these things out ?

When the pits shut, the phone lines would of gone into meltdown with the miners ringing up and crashing websites. 35 years was the figure quoted for full pension. That said am sure if you have worked more than 35 years you get bonuses. I am sure Missis T does.
Without going off topic. One of the reasons Miners are kicking off re there pension robbery. Because wages were rubbish at one time they never paid as much/ full NI contributions to boost there weekly wage. so most will not qualify for a full pension. Yet there miners pension 50% surplus is going to the government. That said.
My advice for anyone looking at retirement. Going online and finding out how many Years NI contributions and expected state pension figures are a priority.

 

[Fade and Die]

I think you can do that check online now. Much easier than trying to get through on a phoneline. Your point still stands though, good to check these things out ?

Yes actually done this online at the weekend, as over the years I’ve had stints of self employment but I’m fully paid up. Entitled to £179 per week which I thought was ok. But then saw I’m not going to get it for another 13 years!?

 

[Tashyboy]

Yes actually done this online at the weekend, as over the years I’ve had stints of self employment but I’m fully paid up. Entitled to £179 per week which I thought was ok. But then saw I’m not going to get it for another 13 years!?

F and D, are you still working/ contributing as that may well go up a good bit.

 

[Fade and Die]

F and D, are you still working/ contributing as that may well go up a good bit.

Yes sadly still working, don’t think it will go up much though. Gov website says the current full state pension is £179.60 per week.