A Guide to Self-Employed Tax-Deductible Expenses
Understanding Allowable Expenses – What are They?
It’s important to understand that you can’t go ahead and subtract all your self-employed expenses. HMRC has clear rules around what you can and can’t include, which is why the costs that you can include in your calculation are called ‘allowable expenses.’ Essentially allowable expenses are costs that are vital to keeping your business running.
If you’re self-employed, you’ll have running costs. You’ll need to work out your allowable expenses when completing your tax returns, as you can subtract certain expenses from your turnover to work out your taxable profit.
E.g. Your turnover is £40,000, and you claim £10,000 in allowable expenses. You only pay tax on the remaining £30,000. This is known as your taxable profit (Source Gov.UK)
Costs I Can Claim – What can I Claim?
It is important to understand what is allowed and what isn’t as an expense. Self-employed tax expenses can be broken down into various claimable costs
Office items that can be claimed include stationary such as phone bills, internet bills, postage, printing, printer ink and cartridges, computer software which is used for less than two years.
You may also claim for rent of business premises, business and water rates, utility bills, property insurance, security, using your home as an office (only the parts that are used for business).
Office or Business Premise
Finally, for premise claims, these include building/ machine repairs and maintenance. (Items such as phones or other office resources that you use for non-business use cannot be claimed)
Travel expenses include vehicle insurance, repairs, fuel, parking, hire charges, vehicle licence fees, breakdown cover, transport fares, hotel rooms, meals on overnight trips. These do not include fines or travel between work and home.
Clothing expenses cover uniforms, protective clothing needed for work and costumes for actors/ entertainers.
Staff expenses include employee salaries, bonuses, pensions, benefits, agency fees, subcontractors and employer’s National Insurance. Allowable expenses do not cover carers or domestic help.
Goods for resale i.e. stock, raw materials and direct costs for the production of goods are all allowable for expenses, however, goods and materials for private use are not cover or depreciation of equipment.
These expenses cover the hiring of accountants, solicitors, surveyors and architects for business reasons as well as professional indemnity insurance premiums. Self-employed workers cannot claim for legal costs such as fines.
Financial claims include bank charges, overdraft charges, credit card charges, interest on bank/ business loans, hire purchase interest, leasing payment and alternative finance payments such as Islamic finance.
Self-employed workers can claim for any insurance policy for your business, e.g. public liability insurance.
Marketing and Entertainment
Claims under this category include advertising in newspapers or directories, bulk mail advertising, website costs and free samples. You may not claim for the entertainment of clients, suppliers and customers or event hospitality.
Subscription claims include the trade of professional journals or trade body or professional organisation memberships if related to your business. You may not claim for payments to political parties, gym memberships or donation to a charity.
How to Claim – Does this Apply to Me?
If you need to make a claim for self-employed tax-deductible expenses, you’ll need to make sure keep records of all business expenses as proof of your costs. Your expenses will need to be added together for the tax year and put into your self-assessment tax return form. There is no need to send proof along with the submission of your tax return, but should you need to be questioned by HMRC it is wise to keep a record for yourself as proof.
It is vitally important that your records are accurate.
If you need more Advice Speak to Moore’s Accountancy
Here at Moore’s Accountancy, we’re one of the area’s leading chartered accountants so if you need any support with your tax, speak to our team. We offer a professional yet friendly service and have helped clients of all sizes with their business accounting, allowing us to provide user-specific helpful advice
If you’d like to find out more about what you can claim and how to reduce your tax bill go to www.mooresaccountancy.co.uk and we’ll be happy to arrange a sit-down.
Additionally, enter your details using our contact form and we’ll send you a FREE report.