Self-employment
You may wish to include business expenses in your claim. Cheap small business accountants discuss below the types of business expenses that are allowable. When we say that business expenses are ‘allowable,' we mean that the tax rules permit the expense to be deducted from trading income when calculating the business's profits on which income tax and National Insurance contributions will be paid.
What are the allowable business expenses?
To be tax-deductible, all revenue (trading) expenses must have been incurred “wholly and exclusively” for the purpose of operating the business. This means that costs must be incurred while conducting business or attempting to increase business. Pre-trade expenses are subject to unique rules.
How is a revenue expense distinguished from a capital expense?
A capital expense is typically a larger expense incurred to acquire an asset that you anticipate using in your business for an extended period of time and that you anticipate providing an enduring benefit to the business. There is no statutory time limit, but you would expect an asset, such as a computer or office shelving, to last longer than a year.
Capital expenditures may be eligible for capital allowances; in some cases, capital expenditures may be effectively treated as revenue expenditures if the cash basis of accounting is used.
A revenue expense is something that is temporary and is frequently depleted by your actions. For instance, revenue expenses include ink cartridges for your printer and stock that you sell. The majority of day-to-day expenses will be revenue-related.
Is all revenue expenses tax deductible?
Regrettably, no, as certain expenses are not tax-deductible. These are sometimes referred to as disallowable expenses or expenses that must be added back. Additionally, there may be some expenses in your accounts that are split between business and personal use. Personal expenses are not allowable.
To account for non-allowable expenses, you may need to adjust the profit shown in your accounts. For this purpose, cheap accountants in London are always here to help you
