Legal thinking - Maximise profits

Legal thinking

Helping to maximise profits

Staying legal will increase your profits as your income grows! Nobody is suggesting that you would act illegally, but it can be easy to get things wrong when you concentrate on building sales without thinking of the possible consequences. Putting more money in your pocket is great, but think about the possible implications before they become a problem, then turn them to your advantage.

Obviously, more money in your pocket will enable a better lifestyle. A newer car, foreign holidays, perhaps a change to a bigger house. People will take note and unfortunately, greed and envy being a part of human nature, someone will assume that you are fiddling the system and 'shop' you (report you to the Inland Revenue). No problem if you have already planned for this. Indeed, expect it to happen and put in place some simple protection so that you are both legal and fireproof. Also, you will be able to reduce any liability towards tax - legally.

From your very first day, keep a simple ledger. All it need be is a notebook with one page for your expenses, another page for your income. Keep each and every receipt. This will do two things:-

1) It will show how well you are doing.

2) It will be proof when you declare your profits to the Revenue (usually when you fill in your annual Self Assessment form)

How does this help you? You are now running a business. Legitimate costs
are deductable from your income before taxation, therefore being able to offset costs will maximise your profits.

Example. If you keep a room free in your house as an office, you can charge for that as a business expense. Likewise, part of your telephone bill can be re-claimed. If you have an Internet business then you will be able to claim for part - or all - of your ISP's monthly charges, your software costs and a string of other small items. Remember your Gran's saying about "Looking after the Pennies"? Costwise, those pennies will soon add up and keeping a record of them will become increasingly important.

Say you are running a business on e-Bay. All your purchases and your mailing costs will be legitimate expenses. You will be charging your cutomers for the post & packing but you don't want that money taxed! If you need transport to carry goods then part of your motoring expenses will also be recoverable. In fact, almost all legitimate business costs will be at least partially recoverable.

Of course, these are early days. If you really start to make substantial profits, you will need the services of a professional accountant. Guess
what? Your accountancy fees are fully tax deductable too..............

Any doubts? Visit your local Inland Revenue office. The 'Big Surprise' will be the attitude of the people who work there. They are used to people trying to pull the wool over their eyes and generally trying to cheat the system. When someone like you actually asks for advice, they really are incredibly helpful. They may even suggest money saving options which you haven't even thought of!

Paying less tax means a higher profit margin. For you, it's a 'Win Win' situation. Combine that with the fact that you are free from worry about getting on the wrong side of the law and it really becomes a no brainer.

Note for readers outside the UK. We are discussing the legal implications as they apply in the UK. It is likely that similar laws will apply in your country but do take locl legal advice.

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