Do you run a small business? Perhaps you are an independent contractor or a freelancer working from home? If so, it’s essential to know where you can save money and also what percentage of costs you are entitled to claim back. Individual savings may seem relatively low and somewhat pointless until you add them up and realise what you may be able to save annually.
First things first…what type of company are you?
This sounds simple, but it can be very costly if you do not register yourself under the correct category. If you are self-employed, you need to register within three months, but you also need to stress to HMRC that you do not work for customers. If you don’t do this, you may end up paying considerably more tax than you need to.
Equally, if you have a limited company, a sole trader, or if you are in a joint partnership, then you also need to register this correctly. Doing this can save you a lot of money, as you aren’t required to pay income tax or national insurance as a limited company.
When running a business, you want to think smart. If your spouse receives a wage from your company, it would be a good idea to lower their salary so that they don’t have to pay tax on it. The current tax threshold is £12,500 per annum, so if you can pay your spouse less, it means more of the money goes to him/her while avoiding a larger tax bill.
Company cars or personal vehicles?
With both types of cover, you should keep track of mileage and fuel costs, and if you want to use company cars, then you need to be aware of the rules surrounding their use, both in and out of working hours. Paying mileage on personal vehicles can be very costly, so tally up the cost for both and see which is better for you financially.
Know what you can claim back
Being self-employed means that you can claim back expenses, and some may seem low, but as mentioned earlier, they all add up. If you work from home, you can claim for the cost of bills and rent (a percentage, not the entirety). If you require the use of a vehicle to work, you can claim for fuel. Your accountant will be able to tell you what you can and can’t claim for, but either way, it’s about saving money which is always beneficial.
Running a business and being self-employed can be very stressful, giving you a lot to think about. Our free ebook has everything you need to know about kick-starting your new business, all you need to do is keep hold of your paperwork, and your accountant will do the rest.