claiming expenses for self employment

[mrswarbler]

Hi,

I need a bit of advice regarding my self employment and the expenses that I can claim.

I work full time and pay my tax for this employment via PAYE. In addition to this, I have started a small side hustle/business from home. I only earnt a smallish amount from this last year (about £4000) however it is not growing I am on track to double this over the next year.

I run the business from home and I understand that I can claim expenses for an appropriate proportion of house costs - heating, mortgage interest etc. I have also purchased a computer and monitor that I am using solely for the business.

My concern is that my expenses are about half of the total money I have made! - will this be allowed? Is this normal for a small start-up business?

I understand that I get a £1000 tax free trading allowance. Based on my £4000 takings, 1K would not be subject to tax so I would then pay 40% on the remaining £3000 which would be £1200. What is my expenses are more than £1200?

TIA

You don’t claim expenses off your tax bill, you deduct them from income before arriving at the figure you pay tax on. Also you don’t claim actual expenses on top of the 1k allowance, it’s one or the other.

Your mortgage interest is not an allowable expense against self employed income.

You can claim tax relief against your IT equipment, but this will be a one off expense.

It's extremely unlikely that you could claim such high amounts on your use of home as office if you are actually also working FT in employment.

I think you're bring a little over enthusiastic in your claims. You need to read the HMRC guidance on how to complete the self assessment sections. It doesn't sound as though you know what you are doing.

Thank you for your post - with respect, I am here asking for advice!

https://www.gov.uk/expenses-if-youre-self-employed

With respect, don't trust a bunch of unqualified strangers on the Internet. Go straight to the HMRC website. (Chartered Accountant here)

The £1000 tax free is for people who dont earn any other money

You only claim against what you would pay tax on

so turnover £15570, tax liability on (15570-12570) pay tax on 3000 less expenses of £5000 so no tax

turnover 20570 tax liability on (20570-12570) pay tax on 8000 less expenses of £5000 so pay tax on £3000 (so £600 plus NI)

I think: its late & I am menopausal

Ok thank you, I just felt that you were a little harsh/spiky in your response and I didn't understand why.

Thank you - my understanding was that everyone gets a 1k trading allowance, regardless of other income?

I never have in 21 years of self emplyment

Have a look here under "Reasons not to claim"
https://www.litrg.org.uk/working/self-employment/trading-allowance#:~:text=The%20trading%20allowance%20is%20a,is%20covered%20by%20the%20allowance.

The portion of your mortgage interest that is solely used for the office in your home (as a percentage) IS allowed

As is the portion used for heat/light/water rates/broadband/phone etc (and a load more of allowable expenses all written about in the HMRC guides and videos)

So for example my office and the client loo is one third of my property and is SOLELY used for that (they're not living spaces). So it's very easy for me to work out as it's literally a third of everything above.

Personally my deductions (I use the simple method which is literally all monies gained minus all deductions) and my deductions are nearly two thirds of what I make.
Crucially if asked you must be able to prove every cost (this is very easy for me) and I'm in an industry with incredibly high costs for insurance, supervision, ongoing professional training etc.