What can and can’t be claimed as self-employed allowable expenses?

If you are self-employed, there are certain business expenses you can deduct from your tax bill to lower your liability.

Cooper Accounting explains allowable expenses to clients simply, to ensure you understand what can and perhaps more importantly what cannot be claimed with HMRC.

Tax-deductible self-employed expenses can be complicated. Cooper Accounting works hard to stay on top of HMRC updates and the latest guidelines to ensure clients make the most of their entitlements and remain compliant.

HMRC allows you to deduct the costs of certain purchases that are necessary to run your business. These costs can be deducted from your profit to reduce the amount of tax you will owe.

Items you buy for your business can be classed as capital assets rather than allowable expenses – such as a computer or machinery (which may be claimed under different rules) you can deduct the full cost when working out your taxable profits and could receive immediate tax relief for the full amount.

The best way to get a head start on your annual tax return is to work with your Accountant to keep on top of your allowable expenses, profits, and tax.

So, how do you know what are tax-allowable expenses you may be able to claim?

See how simple guide below, which incorporates A-Z lists of allowable expenses, whether you work from premises or at home.

If you use business premises you can claim the following:

  • Business rates
  • Cleaning
  • General maintenance
  • Heating
  • Lighting
  • Rent
  • Water rates

You cannot claim:

Initial cost of buildings, alterations, and improvements (such as extensions) although such work may qualify for annual investment allowance* or capital allowances**.

If you work from home, you can claim a proportion of the costs the following:

  • Cleaning
  • Council tax
  • General maintenance
  • Heating
  • Insurance
  • Lighting
  • Mortgage interest
  • Water rates

You will not be able to write off all of your bills. The figures you submit should be based upon the floor area or number of rooms used for your business, and the proportion of time the space is used for working.

E.g., if you work from a home office that is 50sqm within a 500sqm home, this equates to 10% of the space and if you work for 5 out of 7 days that is 71% of the week. If your home energy bill is £500, you could claim 10% of the bill if 10% of the bill is to heat the home office. Working 5 out 7 days entitles you to claim 71% of the £50 so £35.50 is an allowable expense/tax relief from your energy bill.) If you work for more than 25 hours each week, you may be able to use HMRC’s simplified expenses system.

Travel and accommodation expenses:

You could claim:

  • Travel and accommodation on business trips and between different places of work.
  • Running costs for a car or other vehicle, including petrol, car tax, insurance, repairs & servicing.
  • If you use the car privately, you can only claim a proportion of the costs equal to how much the car is used for business purposes. (This is usually the ratio of your business mileage to your total mileage. It is worth keeping a log of business mileage for a representative period, as well as all bills.)
  • Reasonable sustenance costs (when you are away from your workplace or on an overnight trip etc.)

You cannot claim:

  • Travel between home and workplace.
  • The cost of buying a vehicle (though it may qualify for capital allowances**).

A guide to claiming expenses on salaries and benefits:

You could claim:

  • Employees’ wages and redundancy payments.
  • Employer’s National Insurance
  • Insurance and pension benefits for employees
  • Any employee childcare provision you make
  • The cost of training employees

You cannot claim:

  • Your own wages, salary or other money drawn from the business
  • Your own National Insurance contributions and income tax
  • Your own pension costs
  • Your own life insurance

Get advice about your allowable expenses and what to save for your tax bill by contacting Cooper Accounting today. We will explain everything in plain English with no jargon!

t. 01422 340990 \ 07789 072596 e. hello@cooperaccounting.co.uk

Find out more:

A-Z Expenses & Benefits – https://www.gov.uk/expenses-and-benefits-a-to-z
Self-employed Expenses – https://www.gov.uk/expenses-if-youre-self-employed
*annual investment allowance – https://www.gov.uk/capital-allowances/annual-investment-allowance
**capital allowances – https://www.gov.uk/capital-allowances