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Capital Allowances can help sole traders continue trading

The number of self-employed business owners in the UK has grown significantly in recent years, from 3.9 million in 2000/01 to 4.9 million in 2015/16.  But a fifth of self-employed sole traders don't survive for more than a year, analysis by the Institute for Fiscal Studies (IFS) has recently shown.  


Other factors associated with more ‘established' businesses also influenced the likelihood of business closure, with sole traders who use capital allowances to their advantage, more likely to continue trading than those who do not.  


Afford Bond Partner, Paul Edwards explained: "Capital allowances are a way of reducing your tax bill when you spend money on something that will benefit your business in the long term, like new laptops, for example. This is called capital expenditure, and with the right advice from an expert accountant, you can often save rather a lot fo money, which in turn can be reinvestd into your business."


Business owner-managers are found in all sectors of the economy, with sole traders most commonly working in construction or business services. While the overwhelming majority (80%) of sole traders survive beyond the first year of starting a new business, only 40% remained trading into their sixth year. So it makes sense to take advantage of every tax break or incentive available.


In general, the IFS said sole traders who are aged between 35 and 54, have been trading for longer, and have higher profits and sales are more likely to keep trading in any given year.  And around 10% of business closures since 1997/98 can be explained by incorporation, which can have tax advantages for higher-income sole traders. If you would like to know more about capital allowances and capital expenditure, please contact Paul.Edwards@affordbond.com or complete the Contact Us Form on our website at www.affordbond.com