Tax Planning Tips For Self-Employed

Calculating tax and taking every bit of detail into account can be quite boring and exhaustive. But dealing with it sooner than later will save last minute mistakes and panic situations. Rushing with the detailed and tedious procedure at the last moment could mean missing out on vital information leading to incorrect tax return claims.

Here are a few tips for the self-employed that will help you save some tax deductions and even claim some back.

Pension tax relief

If you are a resident of the UK aged under 75 years and personally deposit amounts for your pension, you are eligible to get tax relief on the amount you have paid till now. This is usually paid automatically into your pension by the government. For example, if you pay in £8,000 to your pension, you will get a tax relief of £2,000 (20%)by the government.If you pay tax at a higher rate of 40% you could get a tax relief of upto 20% if you claim it. If you still haven’t got a pension yet, and want to save for your old age, you can open one now and can also benefit from the perks of tax returns.

Allowable expenses and extras

If you run your own business, there are various types of costs involved. If you deduct some expenses from your profits before the tax date, you can lower down your tax bill to some extent. Examples of such costs include:

● Clothing expenses, like uniforms
● Travel costs, like fuel, train or bus fares, parking
● Staff costs,like salaries or sub-contractor costs
● Stock and raw materials
● Repairs and maintenance of office property
● Credit card processing fees
● Office supplies like stationery
● Phone bills
● Advertising expenses
● Traveling costs and the like
Ensure you are claiming for every expense you are entitled to get a return on.

Work From Home

Those who work from home can also claim a certain portion for the costs involved in a sole trade or in partnership. Calculate the amount of money you spend on work purposes or just claim a flat rate known as simplified expenses. Based on the number of hours you work from home each month you have to calculate your allowable expenses using a flat rate. It means you don’t have to work out how much of your utility bills are for business, that is, the proportion of personal and business use for your home. This does not include telephone or internet expenses. You can only use simplified expenses as mentioned below, if you work from home for 25 hours or above:

Hours invested for business use per month	Flat rate per month
25 to 50	£10
51 to 100	£18
101 and more	£26

For example
If you have worked for 40 hours from home for 10 months, but worked for 60 hours for 2 particular months, this is how you will calculate the expenses:
10 months x £10 = £100
2 months x £18 = £36
You can claim a total of = £136

Charity Donations

If you want to reduce your tax bill, you can make some charity donations just before the tax date. This strategy is useful if you paid a higher rate of tax last year and a lower rate this year, and moreover you can still claim a higher rate of your tax relief on your donation.

Overpayments for last 4 years

Check closely if you have made any overpayments in the last four years or made any mistakes in previous years’ tax returns. In such cases you can claim for refunds by writing to the HMRC for an ‘overpayment relief’.

A major area of concern and confusion is tax relief. If you are a busy self-employed person looking for an end-to-end help in tax billing and tax return claim, we at CoreAdviz will help you with a seamless and quick tax returns service.