Enter Your E-mail

Many people are not aware that you can claim expenses incurred in the seven years before commencement of trading against your first year’s trading profits.

The expenses are treated as having been incurred on the first day of trading.

The rules for determining whether a pre-trading expense is deductible mirror those for expenses generally. For a pre-trading expense to be allowable it must have been incurred wholly and exclusively for the purposes of the trade.

Make sure you keep all receipts for expenses incurred in this way.

Example:
Adrian has incurred pre-trading expenses of over £5,000 and has kept all his receipts for these expenses, which are all qualifying expenses.

As a result, his profit in his first year of self-employment is lowered by £5,000. A 45% taxpayer would save £2,250 in tax, a 40% taxpayer, £2,000 in tax and a basic rate taxpayer £1,000 in tax.

So once again, make sure you keep all those receipts as you could make a very significant tax saving.