If you are doing your own tax return, you may well be assuming that you simply add up all your expenses and put them into the return. However, there are different tax rules for some items of expenditure.
Here , we look at some of the common areas where it can go wrong or you can pay more tax without the help of an accountant.
1. What are you driving ?
Is it a van or a car? This question sounds simple enough but some vans are actually technically classed as cars for tax purposes. Don’t expect the garage to know the difference. This can be a very costly mistake.
2. Have you considered going VAT registered?
Most small businesses will be trading below the threshold of compulsory registration which is currently £68k per annum.However, there are a number of different VAT schemes and a review of these with someone who understands your business, may mean that you are better off.
3. If you use your car for business, do you know how to maximise the cost for tax efficiency?
Cars that are very low in C02 emmissions can be 100% tax deductible.Do you put fuel receipts into the books or keep a mileage log and claim the HMRC rate?
Example: £50 of fuel bought for 386 mile trip v 386 miles at 40p = £154
4. Use of home as office
Even if you are out on the road, you can claim for use of home as office.
5. Do you lease your car?
Recent changes to tax legislation mean that some of your lease payments may not qualify for tax relief. Again, it is the CO2 emmission of the car which will determine how much tax relief you can get.
6. Did you undertake a course before you started up in business?
Training is one of the expenses specifically highlighted on the self assessment form as not being allowable. Note that this refers to initial training only. If you are required to upgrade or keep your skills and knowledge up to date thereafter, this is allowable.
7. Do you have any business loans?
If so, do you know the interest and capital element of each re-payment. Are you claiming the interest element as a business cost?
8. Do you entertain employees/customers/suppliers?
You are able to spend £150 incl VAT per person on staff parties provided that all staff are invited. If you spend more than this, the whole amount is disallowable for tax.The entertainment of customers and suppliers will usually be disallowed for tax purposes.
9. Did you have any expenditure before you started trading?
Purchases before you started trading can be shown as part of the business costs in your first year.Don’t forget any personal items that you now use in the business: computer/laptop/printer
10. Does your partner help you in the business?
You may be able to pay them wages from the business.
11. Avoid penalties and fines
Not only are they a waste of money, they are also not tax deductible. So your late filing fee of £100 will not be classed as a business cost for tax purposes.
