As a Sole Trader, one of the upsides is being able to work for yourself, choose your own hours, your own jobs, having no-one to answer to. But a huge part of being self-employed, or a sole trader as it is otherwise known, is that you have to calculate and pay your own taxes, rather than the luxury of salaried jobs where the tax is automatically deducted from your monthly wage.
However, it is important to remember that as a sole trader, you can only be taxed on your profits. That means any expenses, won’t be taxed and so should be claimed back, and it is up to you to sort between the profit and the expenses. These need to be accurate and backed up with receipts. And remember, you are legally bound to keep these records for six years. So what can you claim for?
What Counts as an Expense?
Sole traders can claim back any expenses that relate directly to their business in much the same way as limited companies. The rule of thumb when claiming for any expenses is that you can only claim for expenses which are ‘wholly and exclusively’ incurred in the performance of your service. There may be some expenses you are already aware that you can claim, such as staff salaries, stock and uniforms. But below are a few expenses you may not know you should be claiming:
Office expenses
You can include business stationery, printing costs (including ink), and postage. You can also include business equipment like computers and printers and computer software.
Travel
You can include business-related car or van costs, including vehicle insurance, fuel, hire charges, repairs, servicing and breakdown cover. You can also include business travel by train, bus, plane or taxi, and hotel rooms and meals during overnight business trips. Note that travel for meetings, site visits etc. is included, but you can’t claim for the cost of travelling between home and work.
Legal and financial costs
If you need to hire a professional like an accountant, a solicitor, a surveyor or an architect for business reasons, you can include the cost in your calculation. You can also include bank overdraft and credit card charges, interest on bank and business loans, hire purchase interest and leasing payments.
Business insurance
You can include the cost of business insurance, for example, public liability insurance and professional indemnity insurance.
Marketing
The cost of marketing including newspaper advertising, directory listings, mailshots, free samples and website costs can be claimed.
Subscriptions
You can include the cost of membership to trade bodies or professional membership organisations if they’re relevant to your business, and the cost of subscriptions to trade or professional journals.
Tax is important, and mistakes can be hugely costly. Make sure you have hired a trusted accountant to do the hard work for you and take the stress out of taxes. If you are a sole trader and need help or advice claiming expenses, or paying your tax correctly, get in touch with Aston Black today.