If you were to ask a tradesperson one of the main perks of the job, they might probably list working hours in the top three. Simply put, flexible working allows you the freedom to earn as much as you’re capable of. You’re in control of the working day, and you decide whether certain expenditure is used to capitalise on tax relief.
However, this also carries a certain level of responsibility – and reliance on your own performance. Should you spend any time dedicated to your finances, you’re effectively losing earning hours. Ironically, it’s this time spent analysing your finances that could reward you in the long run.
To illustrate the impact of getting your tax affairs in order, we’ve provided the below guide to maximising your take-home pay as a tradesperson.
Don’t miss out on expenses
From tools to motor vehicles, there may be a number of expenses you’ll incur before delivering on any job. Fortunately, provided you earn outside of PAYE, you’re able to claim on some expenses provided they are purely for business purposes.
- Home office equipment – Provided you purchase a laptop or stationery for the purposes of sustaining business aims, you can claim for it.
- Tools – Tradespeople rely on their tools. Plus, if there’s specialist equipment which is an absolute must-have for your operation, you may be allowed to claim for it.
- Uniform – Whether that’s overalls for you and an apprentice or simply the purchase of some steel-cap boots, you’re able to classify uniform as an expense. Other forms of protective equipment fall under this bracket, including eyeglasses, helmets and gloves.
- Vehicle – If you’ve just started out as a tradesperson, you may need to switch to a van in order to carry materials. Not only can you claim against the cost of the vehicle, but also fuel, insurance, mileage and road tax.
Ensure you understand all allowable expenses that you may be able to claim for. Even keeping on top of the little things, such as cash purchases for a bag of screws, can see you maximise your take-home pay in an easy yet effective way.
What’s important here is that you accurately log all the relevant payments and receipts. Failing to do so means you won’t qualify for business expenses when HMRC ask for proof, so be sure to organise your accounts in a way that allows for easy reporting. This is especially true when claiming mileage expenditure or other regular purchases.
Stay on top of records
Organising records may sound like a thankless task, but this couldn’t be further from the truth. By being methodical with receipts and business payments, you’ll effortlessly maximise earnings. Effective organisation allows you to capitalise on all opportunities to lower your tax relief. At the same time, you’ll provide yourself with more earning power come January when every other tradesperson is busy wrangling their tax affairs.
Take the time to research digital software solutions that allow you to upload receipts in a timely and convenient manner. Petrol receipts are unlikely to last an entire year in the glovebox, for example, so why not take a photo and digitally store the information online? The same applies for tools as well. Think about how many jobs you’ve worked on where specialist equipment you bought wasn’t needed again that year. Where are those receipts now?
Both of these circumstances present a hole in your pocket, and disorganised accounts are to blame. Having purchase information at your fingertips allows you to ascertain your expected earnings at any point during the year – not just when you submit your Self Assessment tax return.
With this foresight, you’re able to predict annual earnings and you’re also better equipped to stay on the right side of the taxman. Some software solutions that are capable of logging receipts will similarly point out areas in which you can save more or further streamline your tax affairs.
Protect your livelihood with the relevant insurance
Insurance policy costs are another expense that can be claimed for.
If you’re just starting out, you may be unfamiliar with the responsibility you have as a tradesperson to ensure your practice is protected. Whether you’re facing compensation claims and associated legal costs from the public, clients or temporary workers you’ve recruited, it’s important to have a policy in place.
Generally, there are three forms of insurance that may affect tradespeople:
- Professional indemnity – This isn’t relevant to all tradespeople, but if you sell designs, advice or provide a professional service as part of your offering, you will require professional indemnity to cover yourself from claims made against you by clients.
- Employers’ liability – If you have contractors working for you, you are legally required to have an employers’ liability insurance policy in place. This protects you from employees who have been injured or become ill because of the work they do for you and go on to make a compensation claim.
- Public liability – While not a legal requirement, this insurance can provide invaluable peace of mind. Accidents happen, and a public liability policy will pay the legal defence costs where you have been alleged to have caused bodily injury or damage to property.
Choosing policies that are most relevant to your operation will provide protection from any potential threats and are covered entirely by expenses. Again, ensure you accurately keep a record of your investment and you can maximise both gross income and your subsequent take-home pay.
For tax-savvy tradespeople, claiming expenses is the easiest way to reduce your tax liability. A Self Assessment software solution like GoSimpleTax is invaluable in this regard. Not only does it store records of your relevant expenditure and categorise expenses, but it can also highlight further ways you may be able to lower your tax bill.
With its multi-device compatibility, you can effectively take photos of any eligible receipt and log your business expenditure as and when it occurs.
Want to remove the stress of the January deadline and maximise your take-home pay all year round? Speak to a member of our team today.