Guide to expenses for the self-employed

Guide to expenses for the self-employed

Making the decision to go it alone and work independently is one of the boldest career decisions an individual can make. It also has the potential to be one of the most rewarding, opening up a whole range of exciting new possibilities and a completely different lifestyle.

Given the recent dramatic events in the global financial markets, it is perhaps not surprising that increasing numbers of people are moving away from the traditional model of employment and looking for new ways to make a living. One of the positive outcomes of this is that the spirit of entrepreneurship has proved to be alive and well. Encouraged also by the exciting developments in technology and the opportunities this opens up, more and more people are deciding to become self employed, very often through creating their own startup ventures. alive and well, and helped signifi

Things to consider

One of the most intimidating elements of becoming your own boss is the fact you can no longer rely on an employer and its administration team to take care of the extensive range of processes and systems that many of us take for granted. The sort of things that happen in the background of our day jobs and that we only really notice when they go wrong.

Here are some examples of things you need to consider while making the important step of establishing yourself as a self employed business person, or startup entrepreneur.

• Tax and VAT. This is one area where there is simply no substitute for good research and expert advice. It is absolutely critical to make sure you understand exactly what is required of you as a self-employed individual and business owner, and that you meet these requirements without fail. There are also significant financial advantages to be had in this area.

• Startup Costs and Expenses. When employed by someone else, particularly a large organization, we are typically able to manage our expenses simply by keeping a record of all receipts and periodically submitting a form for approval. Self-employed individuals must manage this whole process themselves. Think about all the potential expenses you could incur. A place to work from, such as a home office, is possibly one of the biggest expenses, but ongoing costs, such as phone, internet and other utility bills, plus travelling costs must also be taken into consideration. Having a clear knowledge of all such expenditure will also help you to manage your taxes in the most efficient way.

• Finally, if you are successful in your endeavor, then your business will grow. As it does so, if you are serious about making this as big a success as possible, you will want to facilitate and encourage that growth. This could mean taking on additional workers and becoming an employer, with all the additional responsibilities this entails. It is worth considering in your business plan and other strategies how the possible introduction of employees fits in with the future of your business and what groundwork you may need to do in order to facilitate the change into an employing organization.

Cutting Costs and Maximizing Profit

This is almost certainly the number one priority of any business owner and there are things that can be done beyond simply working harder and longer.Keeping expenditure at an absolute minimum is essential.

It can be hugely beneficial to devote sufficient time to exploring the best financial products. Banks provide accounts, loans and credit cards specifically for the self-employed, and these will often come with incentives in order to win your business, so it invariably pays to shop around. Understanding what money you may be entitled to claim back is another potential source to explore, and a number of Barclays customers, for example, have benefited from making a Barclays PPI Claim.

Numerous tax advantages have been introduced over the years to encourage new businesses and it is critical that business owners understand what is available to them as significant savings can be enjoyed in this area. The idea behind these is that they will soften the blow of the extra costs that someone has to take on as a business owner, and you should make sure you claim for every business tax deduction to which you are entitled, including the following.

• Home Office. The cost of any workspace used regularly, and exclusively, for business can be deducted as a home office expense. This is true of any property, whether you rent it or own it.

• Internet and Phone. Phone, fax and internet expenses can also be deducted, again provided these costs are directly related to your business. For this reason, it might be worth investing in a phone or phone line dedicated entirely to your business so that 100% of the cost can be deducted.

• These can be treated as a tax-deductible business expense if you are entertaining clients, or while you are on the road. Keep costs reasonable, as you will only be able to deduct 50% of the cost of the meal.

• For business travel to be treated as a tax-deductible expense it must take place away from the area of your tax home, and last longer than an ordinary workday, requiring you to get rest or sleep.

An Exciting Future

While it can seem scary and is not a decision to be taken lightly, working for oneself is potentially hugely rewarding. Not just from a financial point of view, but also because of the freedom and independence it offers in terms of your lifestyle as a whole.

It is true that there is a lot to think about, particularly regarding the sort of tasks and activities that we would typically expect our employer to manage for us and possibly take for granted as a result. The business world is arguably friendlier than ever towards entrepreneurs and the self-employed so this should not be enough to put off anyone serious about going it alone. As long as you prepare carefully, speak to the right people and get the right supporting systems in place, you can soon find yourself doing what you love, and doing it on your terms.