What expenses can I claim as self-employed?

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Being self-employed is often the dream that many aspire to – being your own boss, making your own decisions and controlling your own working day.

However, one of the most challenging aspects of becoming self employed is the necessity to personally manage your business finances – particularly your tax.  You can be fined if you make a mistake on your tax return, so it is important to ensure everything is correctly recorded.

Your business will have various running costs and you can deduct some of these costs to calculate your taxable profit when working out your tax return. Do bear in mind that you can only deduct these costs if they are classified as allowable expenses.

What are allowable expenses?

HMRC has clearly defined rules about what is and is not classified as an ‘allowable expense’. These specifications ensure that you are only able to deduct expenses which are essential to keep your business running.

The amount of tax you are required to pay is calculated to include these allowable expenses, for example if your business made £30,000 in a year but spent £5,000 on allowable expenses, you would only be taxed on £25,000.

Which expenses are allowable expenses?

1. Employee costs

Salaries, pension contributions, bonuses, benefits, employer National Insurance contributions and agency fees all count as allowable expenses.

2. Business insurance

Business insurance – including public liability insurance and professional indemnity insurance –  is classified as an allowable expense.

3. Business premises

Although building or buying your business premises is not an allowable expense, you can claim for the maintenance and repair of the premises. You can also claim expenses for rent, insurance, security and utility bills.

If you run your business from home, you can claim your utility bills as an allowable expense, but you must calculate what proportion is used by your business and what is personal home use. You can use ‘simplified expenses’ which is a flat monthly rate worked out by the government if you work from home at least 25 hours per month.

4. Financial and legal expenses

The costs of solicitors and accountants, plus surveyors and architects necessary for your business operations can be claimed as allowable expenses.

5. Professional memberships

The cost of professional memberships can also be included as allowable expenses if you need them, along with membership to trade bodies and subscriptions to trade publications.

6. Office Expenses

Office stationery, printing costs and postage are also allowable expenses. Computers and printers themselves can also be included, but may be classified as capital allowances.

7. Uniform

You can’t include a business suit or regular work clothes as an allowable expense, but if your business requires you and your employees to wear a uniform or safety clothing you can claim for this as an allowable expense.

8. Stock and materials

Costs from producing your stock can be claimed along with the cost of stock and materials themselves can be claimed as an allowable expense.

9. Marketing

You can also claim on the cost of marketing such as advertisements, listings, email and website costs.

10. Travel

You are able to claim the costs of business trips and tickets bought for plane, bus or train travel. You can also claim taxi fares and hotel and meals purchased on a business trip.

You can also include vehicle insurance, servicing and breakdown cover, fuel and hire charges. You can use the ‘simplified vehicle expenses’ flat rate to calculate these expenses. For expert advice on financial services, get in touch and our expert advisors will be happy to help you.