Self-employment costs UK
When you’re self-employed your business will have running costs that need to be met in order to allow it to operate. Some of these costs can be deducted in what’s known as “allowable expenses”. What this means is that you’re taxable amount is lower so you’re tax bill is lower. If you earn £40,000 but have self employment costs in the UK amounting to say £10,000, you’ll only pay tax on £30,000.Allowable expenses
Things like office costs including phone bills and stationary charges, travel costs including fuel, parking and any public transport fares are also deductible. If you need a uniform for your job, that is also tax deductible. Salaries and subcontractor costs are also taken off, and things that you buy and sell on like raw materials and stock are also deducted. Insurances and bank charges are also taken off and the costs associated with running the business and its premises like the heating and the lighting are also deemed tax deductible.
If you use traditional account, you can claim capital allowances. This will save you money on equipment, machinery and vehicles, including cars and vans. If you use cash basis accounting, any car you buy is counted as a capital allowance, although all other items you buy and keep for the business are claimed as allowable expenses as detailed above.
Business and pleasure
Of course, in reality things are not a clear cut and you don’t often keep items just for work. With a car for example, you might use it for business and for pleasure. The good thing with the tax system in the UK is that you can claim for the part used by the business. A mobile phone bill for example can be divided into personal and business calls and you can then claim the business calls as expenses. For more information on this subject why not head to gov.uk?