If you are a self-employed business owner, you will already know that your business is going to incur a lot of costs. But you don’t have to bear those costs personally – you can deduct some of those costs from your businesses. This helps you work out your taxable profit, and means the expense comes out of the business, and not your pocket. But you can only claim back expenses that are considered allowable by HMRC, which can sometimes be a bit confusing. They are also different from capital expenses, which are an area we will get into more in a later blog. To help out, we have put together this guide to expenses for the self employed business owner.
Office, Property And Equipment
Office property and equipment can all be claimed as expenses, provided they are for items you would normally use for less than 2 years. So you can claim expenses for:
Stationary
- Phone, mobile, and internet bills
- Postage
- Stationary
- Printing
- Printer ink and cartridges
- Computer software that your business uses for less than 2 years
- Computer software that your business makes regular payments to renew a license for, even if you use it for more than 3 years.
Rent, Rates, Power & Insurance
- Rent for business premises
- Business and water rates
- Utility bills
- Property insurance
- Security
- Home office use (known as use-of-home)
While you are allowed to claim some building related expenses, you can’t claim expenses for the purchase of business premises and equipment. You also can’t claim for any non-business use of premises, phones or other resources. Some of these may be allowable as capital expenses, but not as allowable.
Car, Van And Travel Expenses
You can claim allowable business expenses for:
- Vehicle insurance
- Repairs and servicing
- Fuel
- Parking
- Hire charges
- Vehicle licence fees
- Breakdown cover
- Train, bus, air and taxi fares
- Hotel rooms
- Meals on overnight business trips
You can calculate your car, van or motorbike expenses using a flat rate system for things like mileage, rather than using the actual costs each time, which usually works out better for you. However, you can’t claim for non-business use of vehicles or travel between work and home premises.
Clothing Expenses
Clothing is a fairly short list. You cannot claim for everyday clothing (even if it is worn for work) under expenses. However, you can claim for:
- Uniforms
- Protective clothing needed for work
- Costumes for actors or entertainers
Staff Expenses
If you employ staff within your business, then you can claim for:
- Employee and staff salaries
- Bonuses
- Pension contributions
- Benefits
- Agency fees
- Subcontractors
- Employer’s National insurance
You cannot claim for carers or other forms of domestic help, including nannies or domestic cleaners.
Reselling Goods
You can claim allowable business expenses for some of your resalable goods, including:
- Stock
- Raw Materials
- Direct production costs
However, you can’t claim for materials for private use, or for the depreciation of equipment.
Legal And Financial Costs
Accountancy, legal and other professional fees can count as allowable business expenses in some cases.
You can claim costs for:
- Hiring of accountants, solicitors, surveyors and architects for business reasons
- Professional indemnity insurance premiums
You can’t claim for:
- Legal costs of buying property and machinery – if you use traditional accounting, claim for these costs as capital allowances
- Fines for breaking the law
Marketing, Entertainment And Subscriptions
Marketing and entertainment is a tricky one. You are allowed to claim for:
- Advertising in newspapers or directories
- Bulk mail advertising (mailshots)
- Free samples
- Website costs
- Trade or professional journals
But you can’t claim for:
- Entertaining clients, suppliers and customers
- Event hospitality
- Payments to political parties
- Gym membership fees
- Donations to charity
If you’re ever unsure about what you can and can’t claim as an expense, it’s always worth talking to your accountant first. We can help you understand what is classified as an allowable expense, and how to record it correctly so that you don’t encounter problems later down the line. If you have any questions, or want to find out more about how we help self-employed business owners with their expenses, get in touch with us today.