It’s Tuesday! The perfect day to talk Tax.
Read this week’s short Tax snippet for doctors, dentists & landlords, to help you save money and get more organised with your tax affairs. It’s just to give you a flavour – in fact, you can read it whilst you drink your afternoon coffee!
This article does not constitute advice.
Professional advice should be taken prior to acting on any part of it.
Don’t be tempted to deduct personal expenses
It is naturally understandable to want to reduce your tax bill as low as possible and maximising expenses is one way to do this. However, the idea that you can “put” personal expenses through your business should be avoided.
Paying for personal items from business funds
If you pay for personal items from a business account then they need to be deducted as “drawings” or as a personal expense in your director’s loan account. This is legitimate, although it adds extra work for your bookkeeper or accountant.
Of course, on occasions, it is acceptable, say if you forget your business card, so long as the correct treatment of the expense is recorded. Doing this regularly though makes your business accounts untidy and harder to manage and analyse.
The better method is to transfer a lump sum to your personal account each week or month that you can then use for personal expenses.
Allocating personal expenses and business expenses
Allocating personal expenses as business expenses could lead in a tax inspection, and even a full investigation.
Only expenses that are wholly and exclusively for business purposes are allowable for tax deduction.