Claiming just expenses on your tax return

Recently I was asked if they could do a tax return if they didn’t have any sales and just put expenses through. My initial thought was why go through the whole hassle of doing a tax return and the stress of meeting the self-assessment deadline if you don’t have to? With a new business, you can go back up to 7 years to claim your expenses and if you earn less than £1000, you can receive trading allowance before you even need to declare your income.

Technically though you could claim just expenses. There are some restrictions in that you would need to prove to HMRC your business is genuine. You need to do at least 10 hours a week with a view to making a profit.

 

So why would you do it?

1.       Self employed and more than one business

Firstly, if you already do your own tax return for another business then including all your expenses in this year will not be too much of an extra burden.  Entering just expenses will generate a loss. This loss can be offset against any profit in the old business and so the tax due would be reduced.

2.       Employed and self employed

Secondly, if you are employed and self-employed, any loss generated from your business can be offset against this employed income. You can claim the loss through your PAYE tax code or through your tax return at the end of the year. 

3.       Self-employed only

If you have one self employed business only and all you have at the moment are losses, then the amount of loss can be carried forward to the following year, every year until you start making a profit.  You can then off-set this against the profit or other allowable income.

4.       Other income and self employed

Finally, you may receive income from other sources.  Some of the allowable income against which you can offset income loss include:

·         Rental income

·         Interest from savings

·         Carry back to the previous year or more in the first four years of trading.  There are complex rules for this so getting advice on this would be recommended.

·         Capital gains but only if you have matched the loss to all of the above first. Some of the more common capital gains can be generated from the sale of shares or sale of a property.

 

5.       Get organised and tracking

Finally, getting your tax return sorted is a good incentive to review your expenses and ensure you are keeping within your budget. You can use this time to see where you are spending too much or if need to renew any licences and just keep you up to date on all your financial figures.

Other expenses

Expenses in general are quite tricky to get your head around. There is so much information on the internet about it that it can be confusing what to belief.  Depending on whether you are self-employed or have a limited company can also affect what expenses are allowed. Some of the more useful posts about this (including my own!) are listed below:

 

Accounting for bloggers

 

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

 

https://www.gov.uk/simpler-income-tax-simplified-expenses

 

https://www.litrg.org.uk/tax-guides/self-employment/working-out-profits-losses-and-capital-allowance/can-i-claim-pre-trade

 

https://www.litrg.org.uk/tax-guides/self-employment/working-out-profits-losses-and-capital-allowance/what-if-i-make-loss

 

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