Self Employed

Allowable Expenses You Can Claim on Being Self Employed

As a self-employed business owner, it’s important to understand the allowable expenses that can be claimed.

What Are Allowable Expenses and How Can They Reduce Your Tax Return If You’re Self Employed?

Expenses are costs for business related assets that can be deducted from your business accounts – this reduces your profit on which you are eligible to pay tax.

Adding these expenses can significantly reduce your tax bill, resulting in potential tax savings for your business. Even if you are working with an accountant, it’s important that you understand your tax return and what expenses you can claim on.

For example, if your annual turnover is £75,000 and you have allowable expenses which total £15,000 then you would only pay tax on the remaining £60,000, which is a significant saving.

Allowable Expenses: Examples

Here are some examples of what you could add to your allowable expenses on your self assessment tax return.

Office Equipment – You can claim expenses for business-related equipment like laptops, PCs, printers, and computer software that has been used for less than two years. Stationery and communications expenses, including postage, printing, and business phone, mobile, and internet bills, can also be claimed.

Professional and financial services – this includes fees paid to accountants, lawyers, and other professionals for business-related advice.

Pension contributions – your pension provider should automatically claim these, so they’re not a business expense and don’t affect your profit but you are eligible for tax relief on any contributions you make.

Staff and Employee Costs – if you have employees, you can claim tax relief on salaries, bonuses, pensions agency fees, sub-contractors, freelancers, and employer’s national insurance contributions.

Travel costs – travel costs can only be claimed if the primary reason for your trip was business.

Food and clothing expenses – Clothing that is exclusively used for business purposes, such as uniforms or protective clothing, may be claimed. Food expenses can be claimed for business-related meals, such as meals during business travel.

Claiming Expenses When You Work from Home

If you’re a sole trader, you may work from home. If this is the case, part of your allowable expenses on your tax return can include things like heating, electricity, council tax and mortgage interest. However, it’s your responsibility to find a way to divide the costs realistically for this – you cannot claim your entire heating bill for example.

You could perhaps divide the bills based on the number of rooms in your house if you use a dedicated home office. Another option could be to divide the costs by number of hours working and not working and take that percentage.

Tracking Allowable Expenses

It is your responsibility to track your own expenses if you are self-employed. You must keep a record of at least five years after the 31^st of January of the current tax year.

To make things easier you can use an accounting software to save time and increase accuracy. This should let you import expenses and receipts either digitally or through uploading images.

Final Thoughts: Allowable Expenses for Self Employed Individuals

Understanding how allowable expenses can affect your tax return could save your business a large expense if you are self-employed.

It can be complicated to understand and to work out can be claimed and what can’t. Essendon Accounts and Tax are here to help – we can give advice and answer any questions you have on allowable expenses if you are self-employed. For more information contact Essendon Accounts and Tax today.