Saving tax for the self employed
If you are self employed then it is important to ensure that you are doing everything you can to reduce the amount of tax you need to pay whilst staying within the rules laid down by HMRC.
Every self employed person and the businesses they run are different so there is no one size fits all. What’s relevant for one person as a way of reducing tax may not fit or be practical for another so each case needs to be looked at individually. In saying that below is a list of some of the common areas which need to be considered.
- Claim your expenses. This may sound obvious but make sure you are claiming all the business expenses possible. This may include a mileage allowance if you use a privately owned vehicle for business purposes or a claim for business use of home.
- Keep good accounting records. This helps with the point above in that the better your accounting records the less likely you are to miss an expenses which could be claimed.
- Payments on account. When your taxable profits reach a certain level HMRC will ask you to make payments on account towards your next tax bill. If you expect profits will fall you can claim to reduce or eliminate these payments on account. This is more of a cash flow issue but still an important consideration
- Losses. If you make a loss then ensure these are dealt with and relieved in the most tax efficient method
- Incorporating. Depending on the level of profits it may be worth trading through a limited company which can give more scope for reducing your tax liability
If you need more advice regarding saving tax or any other accounting and taxation matters then don’t hesitate to contact us.