Being a self-employed entrepreneur has, of course, its perks. Flexibility, independence, and the opportunity to pursue your passion to name but a few.
However, when it comes to taxes, the road can be a bit rocky. First of all, let’s address the elephant in the room: Taxes. The UK public has always struggled to understand taxes, and particularly how to fill assessments. The truth is that many Britons feel unprepared to handle tax requirements. Not only people don’t understand how the tax system works in the UK, but they also don’t understand how to make the most of their self-assessment taxes.
Unfortunately, for self-employed individuals, the responsibility of both handling and paying their taxes can be daunting and confusing. The good news is that there are numerous deductions available to self-employed entrepreneurs that can help ease the tax burden. Not sure where to start with deductions? Here are the most important elements you need to know:
Navigating the Tax Maze As A Self-Employed Entrepreneur
Home office furniture
If you work from home, you are entitled to turning a portion of your home into a functional office space. This will frequently require the additional purchase of furniture, ranging from a desk chair to a storage solution.
How can these purchases translate into tax deductions? As long as you keep the receipt and the item is used as part of your work environment, you can deduce its full cost from your tax. If you have any doubt about it, you can read more about it through the tax relief pages for job expenses on the gov.uk website.
The tax benefits of using your car for business purposes are substantial, but they come with their share of challenges.
If the first thought that comes to your mind is “Fantastic, I should google the closest Hyundai dealership near me and buy a new car for free”, you might be disappointed. Unless the vehicle is bought solely as a business vehicle and for no other purpose, you can claim on the full cost of the car.
As it is often the case, most digital entrepreneurs do not need a business fleet. However, they may need to drive from time to time to attend business events or meet clients. Similarly, the vehicle has additional costs, including fuel, repair, insurance, etc. Even if you only use the vehicle partially for business, you can still claim some costs. You will need to establish a clear division of business and personal use for tax purposes.
Electricity and heating at home
If you work from home, you are completely entitled to claim a portion of your heating and electricity costs in your taxes. The important word here is “portion”. You can’t claim the totality of your energy costs. However, there is a deductible amount for the space within your home that is dedicated to your business activities. You can read more about it on the gov.uk website. Alternatively, you can also reach out to the self assessment helpline by phone on the 0300 200 3310 if you are unsure about how much you can claim in energy and how to do it. The HMRC team is here to help.
There are many other areas that can reduce your tax load. Understanding your tax deduction options can be a game-changer that makes being a self-employed entrepreneur easier all around.