Self Employed sole traders and partners pay tax on the amount of profit they earn in a tax year, after their personal allowances have been deducted. The trick is how much of the takings are profit?
All of the sales of the business should be recorded as turnover, even if the work has not been paid for, or will never be paid for. An expense deduction for work that will not be paid for is allowable under the heading Bad Debts.
The turnover of the business is reduced by allowable business expenses. These will include items bought for resale, tools up to a value of approx 100 pounds, any employees costs, premises costs (including use of home as an office), repairs and renewals, general administration costs (Stationery, postage, telephone usually), motor travel and bank charges.
Larger items (over 100 pounds) that are expected to last over 12 months are allowed under Capital Allowances (a form of depreciation).
For more information contact Will Johnson on 07967 522374.
