Self Employed Claimable Expenses

Ever wonder, what self employed expenses can I claim on my tax return? Read our full guide here to make sure you aren’t missing any of those all important expenses.

Contents

In this article we discuss:

Introduction

Tax Saving Tips When Working For Yourself

This guide aims to give self employed people a better understanding of the sole trader business expenses that can be claimed on the annual self assessment tax return, to reduce their self assessment income tax bill.

When you’re a self employed person, many of the running costs you incur can be claimable as self employed business expenses.

Any expenses you claim must be wholly and exclusively for business purposes.

The more self employed expenses you are able to claim on your tax return, the less income tax you will pay. So keeping track of all your business spends is important! That’s more money in your piggy bank towards your holiday fund.

Pay Less Self Employed Tax

For example, you earn £30,000 in the year, but incurred expenses of £12,000. You will only pay tax on £18,000, which will save you a large chunk off your final tax bill.

How Can I Keep Track of My Business Expenses?

1 – Setup A Business Bank Account

First things first, we recommend setting up a business bank account which is seperate to your personal bank account.

You should get into the habit of making all payments through this account, so that nothing is missed.

There are many business bank account options out there. From your main high street banks such as Barclays & HSBC, to other options which dont charge a fee such as Monzo or Starling.

2 – Sign Up To An Online Accounting Software Package

Online Accounting Software For Self Employed

As tax gradually becomes more and more digital, signing up to a software package for your business is a good move.

With an online accounting software package, you can link your business bank account to automatically keep track of your business income and expenses.

You will be able to generate profit and loss reports for any given period you enter, so you can see how your business is performing.

You will be able to send customers invoices.

Your accountant will love you for it!

An example of online accounting software is Quickbooks.

3 – Record Your Income & Expenses On A Spreadsheet

If the idea of accounting software is daunting to you, or you dont have a lot of business expenditure, a simple Excel spreadsheet is all you need to keep track of your income & expenses.

What Self Employed Expenses CAN I Claim On My Tax Return?

We’ve put together a list of most of the self employed business expenses you can claim when you are a self employed sole trader.

You can claim business expenses resulting in tax relief on the below expenses:

Accommodation Costs

Overnight business trips are fully claimable as business costs that you can claim tax relief on.

If you are staying in a hotel whilst on a business trip, you can claim the costs as allowable expenses.

Accountancy Fees

Have you hired an accountant to help you with your taxes? You can claim their fees as an allowable expenses when you are self employed.

If you do need help with your self employed taxes, the fully qualified accountants at Simple Taxes can help you with your tax return for a one off fee.

We prepare your return, you approve it, we file it. We make it as simple as that!

Advertising and Marketing

You can claim all advertising costs incurred for your business. Examples of claiming expenses include:

Bad Debts

If a you have a customer debt that is outstanding, and you fully know that the debt will never be paid, you can claim this ‘bad debt’ as an expense.

The invoice amount must be included in your turnover figure at the year end, to be able to reclaim the expense as a bad debt.

Bank Charges and Credit Card Fees

Bank charges and credit card costs stuch as interest, overdraft fees, etc can be claimed when you’re self employed.

Business Insurance

Public liability, professional indemnity insurance premiums, employers liability insurance, and premises insurance for your business are all allowable expenses that you can claim. We recommend Policybee for small business insurance.

Computer Software

You can claim allowable expenses on software you have purchased for business purposes, for example Adobe or Quickbooks.

Employees

expenses you can claim when self employed

If you take on an employee or subcontractor, you can claim all expenses which relate to business cost for this. These include:

Entertaining

Staff entertaining is an allowable self employed business expense (official employees only, not freelancers, self employed or subcontractors).

Client entertaining is not allowable.

Equipment

If you purchase business equipment and furniture, you can claim these fixed assets as capital allowances under annual investment allowance. Items of capital allowance such as:

For more information on captital allowances, you can read the HMRC guidance here.

Home As Office

Claim Home As Office When Self Employed

There are 2 methods for claiming home as office as a business expense in the tax year when you are self employed:

  1. Claim HMRC simplified expenses – when you work more than 25 hours a month from home:

    • 25 to 50 hours per month – claim £10pm
    • 51 to 100 hours per month – claim £18pm
    • 101 hours or more per month – claim £26pm
  2. Claim a portion of your household bills – calculate your total home running costs for the year (for example, council tax bills, your electric bill, telephone and internet), and divide by the total number of rooms in your house (excluding kitchens and bathrooms). Apportion this figure for the % of time that you use your office for business, for example 50%. For use when you do a fair bit of work from a home office room. Note – you can claim mortgage interest but not repayments.

Interest

If you have taken out business finance arrangements such as bank and business loans, or hire purchase agreements, you can claim the financial costs such as loan interest and hire purchase interest paid as a self employed business expense.

Legal and Professional Fees

You are allowed to claim legal costs and professional costs that are wholly and exclusively for the purpose of your business.

Materials and Stock

If you buy stock in the tax year for your business this is an allowable self employed expense.

When you are a self employed decorator, the materials you purchase for your jobs such as paint are all claimable expenses.

Self Employed Decorator Expenses

Cleaner or salon worker? The purchases you make to be able to do your job, for example cleaning products or shampoo, are allowable expenses.

Mobile Telephone

Can I Claim For Mobile Phone Bill In My Business?

If you use your personal mobile phone for business use in the tax year, simply calculate your estimated percentage used for your self employed business, for example 60%.

If you have a seperate mobile phone contract for your business, you can claim all of the bill as business expenses, reducing your self assessment tax bill.

Motor Vehicle Costs

Motor Expenses When Self Employed

There are 2 methods for claiming motor vehicle costs as a business expense when you are self emplpyed. You can either claim business mileage, or actual cost:

  1. Mileage – you can claim 45p a mile up to 10k miles, then 25p a mile after this on your business mileage.

  2. Actual costs – you are able to claim the business percentage of motor running costs such as fuel, insurance, repairs, road tax, vehicle licence fees, mot’s, etc.

If you purchase a vehicle, you can put the cost through your self employed business but the amount you can include as an allowable business expense depends:

  1. Van – vans are fully claimable against your business profits in the year of purchase

  2. Cars – you can only claim the business use percentage of the car cost. In addition, you can’t claim the full cost like you can with a van. The amount you can claim each year depends on the CO2 emmissions of the car. You can find further reading on this on the HMRC website.

Postage

If you are posting items you have sold, or posting letters for your business these are allowable expenses that you can claim on your self assessment tax return.

Professional Subscriptions

The subscriptions must be directly relevant to your business to be allowable expenses.

Rent and Rates

If you operate your business from a business premises outside of your own home, you can claim the rental costs, business rates for council tax, water rates, gas and electricity bills, insurance, security, and any general maintenance costs you have paid for.

Stationery

General office stationary such as pens, envelopes, printer ink, notebooks or other items which you use for your business are allowable expenses on your self assessment.

Training

If you purchase training which is exclusively to benefit your business, these costs are allowable expenses.

Travel and Subsistence

If you are travelling to carry out your work, you can claim expenses for:

Tools

Self Employed Tax Help

Smaller tools which aren’t classed as business assets, such as hammers or hairbrushes, can be claimed on your self assessment tax return as allowable expenses, as long as they are used wholly for business purposes.

Uniform

General purchases for clothing can often be difficult to justify as business expenses, as it can be worn for both personal and business use.

Clothes purchased wholly for business use are allowable business expenses. A uniform with your business logo on, or protective clothing are completely self employed allowable expenses and justifiable.

However a nice new dress or suit wont be an allowable expense as HMRC will argue that this is dual purpose and can be used for personal use too.

What Self Employed Expenses CAN’T I Claim On My Tax Return?

Below are some examples of costs that CAN’T be claimed as an expense:

Do I Need To Keep Evidence Of My Expenses?

Yes! It is really important that you keep hold of your business records (receipts, bank statements, etc) for 6 years plus the current tax year.

This is incase HMRC request sight of any evidence to support your self assessment tax return figures.

Failing to provide information to HMRC can lead to hefty penalties.

Anything business related should be kept, either digtally or physically. Some examples include:

Further Information

For further information on self employment, please read the HMRC guidance here.

If you need help with your tax returns, self assessment, or registering for self-assessment, get in touch with us today at www.simpletaxes.co.uk .

Disclaimer

The information contained in this blog is for general information purposes only, and not for accounting and tax advice. You should speak to a qualified professional about your specific circumstances before acting upon any of the information in this blog.

Date Published: May 2023