How to handle your home business taxes and save money

Today’s guest post is from Irwin Mitchell Solicitors:

There’s nothing better than saving money – especially when it’s at the expense of the taxman. However, lots of people don’t realise the ways in which they can save money on their taxes. While sometimes this can just be an inconvenience with individuals losing a bit of money, for home businesses it can lead to critical loses which can be make or break. So if you’re a home business owner, it’s vital you save all you can from your taxes.

Home Businesses and Tax

One tax break you can take advantage of is to make sure you keep a log of every penny that you spend that goes towards your home business. It can be surprising just how much you spend on your home business, particularly in its infancy. All these costs are deductible as business expenses.

As soon as you start in business make a point of setting up a system of keeping receipts, and recording them as well if you’re going to do that yourself.  You can use bulldog clips, an old tin or plastic folders. It’s easy to put it off when there’s so much else to think about, and then end up with a terrible muddle stuffed onto a carrier bag at the end of the year that you’ve either got to sort out yourself, or pay someone else to do. 

Make a habit of checking through all receipts before throwing them away, as you may make business purchases with personal or household shopping – notebooks and pens at the supermarket, for example.  Just highlight the business item and keep the receipt along with the rest.  If you find this too fiddly you could get into the habit of separating business and personal items at the checkout. 

Another way you can save money on taxes with a home business is by applying for the home office deduction. This is a tax deduction for depreciation and operating costs that wouldn’t be there if you didn’t have an office at home. To claim the home office deduction you have to calculate the space you use as your home office and divide it by the actual liveable space of your house. You also work out the extra cost of utility bills that occur when you have an office at home. For example, having to have the heating on all day if you’re working from home.

However, it is not always recommended that you take advantage of this tax break. It can leave you on unsteady footing if you try to exempt capital gains when you sell your house. Claims are also very stringently monitored, owing to abuse of the rule in the past, so you also have to make absolutely sure that every bit of space you claim as work space is actually used for work space.

If you’re not sure which tax benefits you can take advantage of, then it can also help to speak to experts, like Irwin Mitchell solicitors, who have the expertise to make your home business work for you.