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Tax Rules For The Self-Employed

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The word "expenses" became a dirty word during the parliamentary expenses scandal earlier this summer.  But, if you're self-employed, do not put off claiming deductions, reliefs and allowances for legitimate business expenses to reduce your tax bill.

HM Revenue & Customs allows you to deduct most of your business expenditure to work out your profits (but you can't deduct any private expenditure).  There are also special reliefs for capital expenditure (i.e., one-off expenditure to buy or improve an asset you keep and use for your business).  And, you may be able to claim deductions, reliefs and allowances for the current tax year and for the previous six years.

It is vital, however, that you keep impeccable records of all outgoings and income.

Private & Business Expenses

As a recent article in the illustrated, an area where the self-employed often come to grief is on the appropriate mixture of private and business expenses.

"If you run your business from home, you can claim a portion of the expenses.  For example, if you have a six-room house and one room is used for the office, you can claim one-sixth of the rent you are paying," explained Patricia Mock at Deloitte. 

Utility bills can be harder to work out.  "On the annual electricity bill you could claim a reasonable portion," says Mock.  "You would have to make an estimate of how much you use privately and for business."

She points out that it is important that claims are realistic and appropriate, and can be substantiated.

** Additional Information & Advice ** 

You can obtain further information about tax rules for the self-employed on and website.

Always seek advice from an independent financial planner and a solicitor who specialises in before pursuing any tax avoidance scheme.  You can be in your area for free via solicitor matching services, which can also help you to understand the best course of action for your situation and whether you are ready to hire a solicitor.

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