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Self-employed allowable expenses

Thursday, January 18, 2024
AlisonWoodcraft

If you’re self-employed, you only pay tax on the profit you make, known as taxable profit. Therefore, it’s important to understand which expenses you can claim, ensuring you don’t pay too much or too little tax.  

In this article we will cover which costs you can claim as expenses, making sure your self-employed tax return is 100% accurate.  

Many self-employed people work from home, so let’s start with the costs you can claim for when you work under your own roof… Firstly, you need to ensure that when claiming for the cost of heating, electricity, insurance, mortgage or rent, council tax, phone or internet use that you claim the correct proportion of these costs. If you live in a four-bedroom home and use one of the bedrooms as your office, you can calculate what percentage of your overall homeowner costs that equates to. You also need to consider the number of hours you work from home in this calculation. If this all seems a bit too complicated then you can opt to use the flat rate suggested by HMRC – please see https://www.gov.uk/simpler-income-tax-simplified-expenses/working-from-home for more information.  

Let’s cover some other allowable expenses for the self-employed…  

Staff costs – you may require staff or sub-contractors to run your business. If this is the case, you can claim for all associated costs including salaries or invoices, agency fees, bonuses, benefits, pensions, NI and any training courses or professional development that you pay for, for you or your staff, that are directly related to your business. That’s a lot of costs to be claimed!  

What about travel? Not dissimilar to the work from home costs, it can be complex to apportion your work travel expenses, taking personal vehicle use out of the equation. You are entitled to claim for fuel for business mileage, insurance, breakdown cover, parking, repairs and services if you use your own vehicle for business use. However, it may be easier to simply log your business mileage and use HMRC’s flat rate for vehicle expenses. Please see https://www.gov.uk/simpler-income-tax-simplified-expenses/vehicles- for more details.  

Travel expenses can also include vehicle hire costs, train journeys, bus journeys, taxis and even air fares if you travel abroad for work. It’s important to note that if you travel from home to a place of work, this journey cannot be claimed for.  

Clothing… An area that always seems to cause some confusion. Wouldn’t it be wonderful if we could put the cost of our ‘work wardrobe’ through our business. Sadly, that’s not the case. In fact, the only work wear you can class as business expenses are unforms, protective clothing and costumes for those in the entertainment business. You are not permitted to claim for everyday clothing, even if it’s what you wear to work.  

It's important to remember to log your everyday business costs as expenses too. Things like printer ink, paper, postage, IT hardware, software licences and all those stationery and reoccurring expenses that soon add up.  

Marketing is another area that shouldn’t be overlooked. Make sure you’re claiming for advertising costs, website hosting and development, signage, leaflet design and printing and any cost associated with growing your business. You can also include costs such as subscriptions to trade publications and memberships to professional organisations. 

If you resell products or services, you can of course claim the costs of the purchase of these goods, or their raw materials.  

Last but far from least, financial costs can form part of your self-employed expenses. These include bank charges, legal fees, interest on loans, hire purchase agreements, lease payments and of course accountancy fees. Yes – should you choose to use Ellacott Morris to manage your self-employed tax return, our fees will be included as an allowable expense against your overall profit. Our costs often pay for themselves due to our ability to ensure all expenses are claimed correctly, reducing our clients’ tax bills and therefore making our service a very cost-effective one. Not to mention the time-saving benefits and reduction in stress people feel once they hand over the task of their tax return to the experts.  

Get in touch today and find out how we can help you. With offices in St Osyth and Thorpe, we welcome you to come and meet the team to find out more.  


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