Net earnings

If you are self-employed in more than 1 business, add together the net earnings from each, so a loss incurred in 1 may be off set against a profit in another. Don't count as earnings any income from the New Enterprise Allowance Scheme or from sources other than self-employment.

To work out your total net earnings, deduct from gross earnings any business expenses you have incurred, for example:

• rent and rates
• insurance
• employees’ wages
• printing and stationery
• repairs and postage

You can make an allowance for depreciation of equipment or a vehicle if used for your business.

You should not make deductions for any of:

• your own drawings - that is money you take out of the business to live on
• Income Tax payments
• Class 2 or Class 4 National Insurance contributions

You should account for the amount or value of any stock you withdraw from your business for your own use. Where you also have earnings from another job where you work as an employee in the same year and those earnings are shown in the accounts of the business as a business receipt, you can disregard those earnings when working out the profits from your self-employed business.

After HM Revenue & Customs get your estimate of what you are likely to earn they:

• will check your application
• will check your Self Assessment returns, if available
• may ask you to send a copy of your profit and loss accounts
• may take into account your earnings in earlier years and any changes that have occurred since

If you are a new business your estimate will be sufficient.