Self Employed? Put More Money In Your Pocket - A Guide

Discussion in 'Money, Accounts & Finance' started by ladyvgw, Apr 7, 2016.

  1. ladyvgw


    Aug 14, 2010
    Hi all,

    Been a while since I added any articles so thought I try and give some (hopefully) useful advide.

    Being self employed and running a business can be an expensive process and it doesn't help if money is wasted unnecessarily by overpaying the taxman. Now don't get me wrong, tax evasion is illegal and tax avoidance although not illegal is morally frowned upon. There are however things you can do perfectly legally to minimise your tax bill leaving more funds in your pocket to help grow your business. Tax efficiency is whole different kettle of fish!

    The first, and probably most important thing you should do is......

    1. Make a personal financial plan.
    Planning ahead can save you time, money and headaches. If you are in any way unsure about any of your tax obligations then speaking with a financial advisor is advisable.

    2. Claim Business Expenses
    There are lots of costs that you will incurr in the day to day running of your business that can claim as an expense so you can offset the cost of running your business against your income to reduce your taxable profit. For example - if you work from home then claim a proportion of your household bills or if you need to travel to see customers or suppliers you can claim mileage expenses. I believe you can currently claim 45p ofr every mile you drive up to 10,000 miles PA and 25p per mile for everything over. Have a look at this helpful fact sheet from HMRC -

    3. Make Use Of Non Or Low Earing Family Members
    Every member of your member that is ablee and old enough to work has a personal tax allowance of £10,800 (2016-17) so if you are a higher rate tax band and you do your own booking keepin and record keeping you are quite within your rights to employ your spouse/partner to do this for you and their earnings up to £10,800 are completely tax free and an allowable expense for you! You would have to pay national insurance but only for wages above £155 per week. More info on National Isurance allowances can be found HERE

    4. Keep Your Cash Tax Free
    If you have surplus cash (a luxury not all of us have!) then keeping it in the bank is not really an option with todays exchange rates so make sure you maximise your cash ISA's and gift excess money to your partner if they are a lower rate tax payer having first used up their ISA allowance. Make sure you are certain that your partner will gift the money back to you if its needed!

    5. Protect Against Periods Of Unemployment
    Being self employed means that you could experience illness or other periods of unemployment by yourself or other people you employ who are important to the sustainability of the business. Insuring against this will ensure that should you be unable to work and earn money you will still be able to live. Premiums will not get tax relief but payments are made tax free.

    6. Pay Your Tax On Time
    Seems obvious but there are penalties in place for people who do not send in their tax returns on time or who fail to pay tax that is owed. Make sure you save money during the year so you can meet any tax obligations.
    Jed and Gary like this.
  2. Gary


    Aug 22, 2009
    A good guide for those starting out, but could I just add that from 6th April 2016 standard rate tax payers can earn up to £1000 in tax free savings interest on top of their ISA interest (£500 for higher rate, but £0 for additional rate), this could be interest from savings accounts, current accounts or even peer to peer lending.
    ladyvgw likes this.
  3. 0754ben84


    Mar 13, 2010
    Or just do what David Cameron has done and hide your tax info

    What's good enough for the goose and all that!
    Cody likes this.
  4. Sc0tty


    Jan 19, 2010
    Good post about keeping tax liabilities down. There are many measures available to reduce the amount of tax payable. Most are perfectly legal and moral. The most recent measure I have used is to put child care costs through the business. Only allowed to put £238 a month through, but thankfully that is roughly how much we will be spending. That's £571 saved in tax each year.

    Since I started I now manage to put through some £6-8k of costs through the business. All small costs, that quickly add up. And save me £1500 in tax.

    I have several other measures I am looking at, such as charging interest on the director's loan (in credit) and employing my partner. Though I do wonder where is the line between whats moral and what is not and am i starting to cross it???

    He never hid anything. He held shares in a company that was based abroad. No different to holding shares in google apple or tesco.
    Last edited: Apr 20, 2016
    ladyvgw likes this.
  5. Mark Partridge

    Mark Partridge

    Dec 12, 2015
    Great guide for any first time business owners.

    The best way to limit your tax expense would be to make no profit!
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