Going Self Employed brings freedom, flexibility and the opportunity to build a business you love. But what about the tax benefits of going self employed?
If you are in full time employment and wondering what you may gain by going self employed, then you have come to the right place.
The Tax Benefits of Going Self Employed
When you are employed by someone you receive a your salary after deducting things like:
- National Insurance
- Pension contributions
Now, just to be clear everyone needs to pay tax and the amount they pay is based on their earnings and their employment status.
When you go self employed you:
- Are responsible for working out your own taxes
- Pay Income Tax and National Insurance (Class 2 and Class 4)
However the tax benefit comes because the amount of tax you pay is based on the amount of profit you make in your business.
That means you can deduct costs from your income to reduce it, before working out your tax and national insurance.
These costs are known as Allowable Expenses.
Allowable expenses are business costs that you pay for while doing your job. You cannot deduct any private expenses.
Allowable expenses are things like:
- Mobile phone
- Computer and printer
- Business travel
- Branded clothing
There are special rules you need to follow but in some cases people who are self employed can also claim an amount against their taxes for:
- Your home or rent
- Car payments
- Car insurance & maintenance