A lot of people are confused by the fact that business expenses are deducted from your profits and not your tax bill.

They think that if your tax bill is £40K and you spend £10K in expenses, your tax bill becomes 30K, however that’s not the case.

Expenses are actually deducted from your profits and then tax is applied.

For example, with corporation tax you pay 19%, so on $40K profit and $5K of expenses you’d then be taxed 19% of £35K.

So remember, business expenses are deducted from your profits and not your tax bill.