For most, self assessment season is in January. For us, it is all year round. We regularly review your tax position so we can be active in your planning rather than passive. This helps ensure our clients are always in the best position to keep their taxes low.
How we help our clients
Personal taxes are all about choosing the right option at the right time. We have advised clients on the most tax efficient options of for purchasing or leasing vehicles, to maximise their working from home deduction, Employers NIC allowance and much more. See below for some of the less known ways that you can maximise your deductible expenses.
Car Expenses - more than just mileage
Many self employed people are aware of being able to claim mileage for using their cars, motorcycles and bicycles. However, there is more than one way to claim, which may help those who own cars with large fuel consumption.
HMRC have set rates that can be claimed back for the number of miles travelled using one's car, motorcycle or bicycle. The rates are shown on the right.
It is important to keep a log of your journeys should HMRC challenge anything.
All other costs cannot be claimed, apart from the interest on a loan.
Car - First 10,000 miles 45p, 25p thereafter
Motorcycle - 24p per mile
Bicycle - 20p per mile
Direct Cost Method
This method allows you to claim the proportion of the miles used for business against the vehicle costs.
As above, you will need to keep a list of the miles traveled for business purposes.
By taking the proportion of the car used for business travel and applying this to your total motor running costs for example, fuel, insurance, road tax, maintenance, etc. this will produce the tax deductible expense. You can also claim the interest on the loan used for the purpose of buying the vehicle.
Capital allowances may also be claimed for the cost of the vehicle. The rate that can be claimed depends on the emissions of the vehicle and the type, for example, for vans, the Annual Investment Allowance could be claimed which is 100% of the cost subject to the private use.
You can also claim 100% first year allowance on new cars with low CO2 emissions of not more than 110g/km.
However, cars that have CO2 emissions of more than 130g/km can only claim 8% of the cost per annum.
The Direct Cost Method may be more favourable for those with cars with large fuel consumption or large maintenance cost, where the fixed mileage rate would not cover these expenses.
We would be happy to discuss these options with you.
Working from home - Utilities, mortgage interest & council tax
HMRC provides a couple of ways to pay yourself back for using your home as a business.
The fixed method allows you to claim a fixed amount each month depending on how much time your work from home. These amounts are shown on the right.
25 - 50 hours a month £10 a month
51 - 100 hours a month £18 a month
101 hours + a month £26 a month
However, HMRC also allow you to claim for your utilities expenses, council tax rent/mortgage interest based on the proportion used for working. This would involve looking at the room used in relation to the total number of rooms in the house and the number of hours the room is used for.
You should be careful not to use any room wholly for your business as this will effect your primary residence relief when you sell the property. Typically you should try and use the room for other things besides work.
Don't forget to claim the furniture you use for your business. If this is wholly used for your work, then it can be entirely claimed. If there is a mixture of private and business then this can be claimed too.
Any expenses incurred on fixing these items can also be expenses, although this will be restricted to the private and personal use.
Cash vs accruals basis
Sole traders and partnerships can chose between recognising their income and expenses on a cash or accruals basis.
The difference between the two methods is what exactly is included in your tax return. The cash basis works on when you make payments or receive cash, you recognise it. The accruals basis recognises sales and expenses in the accounting period they were incurred, but necessarily paid.
The chosen methods could effect the amount of tax you pay and can be used to your advantage.
The list below is meant to be a guide of other expenses that people forget or do not claim. We would be happy to discuss any of these in more depth.
Mobile phone and broadband
Apportioned according to your business and personal use
For example wages, pension, National Insurance contributions, training, childcare provision, can be claimed for.
Membership fees and subscriptions
Specialist clothing can be claimed, for example, costumes for actors, protective clothing. Other day-to-day clothing would not be allowed.
Professional and accountancy fees
The cost to prepare annual accounts, bookkeeping, payroll and tax returns and compliance can be deducted for tax purposes.
Courses intended to maintain and update your existing skills are allowable as long as it relates to your business profession. Training to learn new skills are not allowable as these are considered to be capital expenses.
Travel abroad such as flights and hotel accommodation are allowable expenses. Related expenses such as food costs are also allowable within reason.
Working Abroad and the World Wide Subsitene rate
People who work abroad and are classified as temporary workers can claim different expenses to other people travelling abroad for business. For example, in addition to their cost of travel to their workplace abroad, their accommodation and subsistence they could also claim for their spouse/civil partner and children for travelling to meet them for up to two trips. The worker must also be abroad for 60 days or more.
The World-Wide subsistence rates produced by HMRC provides a list of benchmark scale rates that employers can use to reimburse accommodation and subsistence expenses incurred by employees who travel outside the UK.