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Expenses, Deductions, Sole Trader Or LTD? (UK)

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  • Expenses, Deductions, Sole Trader Or LTD? (UK)

    Hi,

    I was wondering how some of you deal with expenses you may have
    working as a freelance retoucher and maybe photographer, what can you deduct from your income,

    for instance if you work from home, can you deduct part of your flat rent?

    if yes, how to calculate the percentage?

    also telephone, internet costs, petrol or anything else you use for work and privately,

    is there a difference between a sole trader or LTD company in the range of deductions?

  • #2
    Re: Expenses, Deductions, Sole Trader Or LTD? (UK)

    In the uk you an deduct the cost of utilities(gas/electric) for the room you use as an office if you work from home ,providing that room is only for work use.
    I dont believe you can claim back rent if the flat is also for residence as that would be an expense whether you worked there or not.
    You can claim on Petrol for trips solely for the business. Im not sure for a car but last time I looked it was 24p a mile for a motorcycle and you can also allow for cycling for work use(courier or travel /from to clients).Not sure if you can claim other vehicle expenses but I believe you can ,providing again that the vehicle is for work purposes only. Any equipment bought for the business is tax allowable. Business consumables too(stamps/envelopes/paper/ink etc).
    Look on HMRC site for what is allowable and how it is categorized and the difference for limited or non limited companies.

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    • #3
      Re: Expenses, Deductions, Sole Trader Or LTD? (UK)

      As I remember you can calculate the proportion of your house/flat that is used for the business and claim that proportion of rent, rates and utilities. I agree with spotter about mileage costs and equipment. You can also claim for training (eg DVDs, books, on line programs) and software. It is best to keep all receipts.

      The Inland Revenue will take a dim view of any business that has expenses approaching or exceeding the annual turnover (but that would be OK for the first 2-3 years of a new business)

      It is almost certainly worth getting an accountant, it will probably cost about £100 - £200 for the year unless your affairs are very complicated and the accountant will usually save you more than that.

      Comment


      • #4
        Re: Expenses, Deductions, Sole Trader Or LTD? (UK)

        As mentioned above save every receipt that has even a tangential link to running your business: even the small amounts will add up over the year. Consider applying for VAT status as this will save some money - 20% on the cost of a Mac is serious money now.
        I became an Ltd which saves some tax and protects personal assets but it comes with legal obligations. Talk to your local Business Link and such - there's loads on the web.
        As Adam says, an accountant will probably save you his/her fees over the year.
        Good luck with the enterprise.
        R.

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        • #5
          Re: Expenses, Deductions, Sole Trader Or LTD? (UK)

          I think you can only register for VAT if your turnover is £60'000 or above (Mine is nowhere near :P). The HMRC site has lots of information about everything including what can and can't be claimed for,when and whether to register as a freelancer etc.
          Surely you can claim the cost of the accountant as a business expense in any case?
          Last edited by spotter; 02-03-2011, 12:54 PM. Reason: afterthought!

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          • #6
            Re: Expenses, Deductions, Sole Trader Or LTD? (UK)

            You can register for VAT if your turnover is below £70k but you are obliged to register if your turnover is above 70k.

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            • #7
              Re: Expenses, Deductions, Sole Trader Or LTD? (UK)

              Aha I see! Thanks Repairman.

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              • #8
                Re: Expenses, Deductions, Sole Trader Or LTD? (UK)

                If you do register for VAT you will be liable to Corporation Tax. Which is an additional tax on the profits of limited companies. Really isn't worth it if your income stays under the threshold.

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                • #9
                  Re: Expenses, Deductions, Sole Trader Or LTD? (UK)

                  Corporation tax is not an additonal tax Garnet, it's the tax. Pixeljar needs to weigh up what suits his situation best and speaking to a friendly accountant would be a good first step.

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                  • #10
                    Re: Expenses, Deductions, Sole Trader Or LTD? (UK)

                    Here is a quick overview of legal structures (UK):

                    http://www.businesslink.gov.uk/bdotg...type=RESOURCES

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                    • #11
                      Re: Expenses, Deductions, Sole Trader Or LTD? (UK)

                      I prefer to remain self-employed unless the business gets very profitable.
                      I keep all receipts except the ones for the petrol, but I make notes how many miles I have travelled based on the client's post code-hope it is enough. I also print my oyster card reports if I use public transport. It's all recorded in Excel, which makes things easier for calculations. I was also wondering if you deduct lunch expenses at all when working all day outside your office?

                      Thank you all!!

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                      • #12
                        Re: Expenses, Deductions, Sole Trader Or LTD? (UK)

                        Allow at least 45p per mile as you have to consider 'wear and tear' on your car. If you're working in the 3 cities you've indicated I would claim the travel also. If the lunches are taken in an area away from your base then I would claim those as well. Basically, claim for stuff and HMRC will refute it if necessary. I have every receipt for the last 14 years - I've never been asked to present any of them for checking but that doesn't mean they won't ever want to see them! Another reason to use an accountant is that they know how to present your accounts to HMRC in a professional manner.
                        R.

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