Self-employed? Make sure you’re claiming for your allowable expenses

Jun 13, 2023 | Tax Tuesday, Taxation

As a business owner, you’ll be no stranger to the inevitable costs that come with running a successful business. However, you can claim tax back on some of these expenses; these are allowable expenses.

Although some expenses may feel small on their own, they add up over time – not to mention the larger outgoings such as equipment and staff costs! As an example, if you had a turnover of £95,000 one year, but you spent £25,000 on allowable expenses, then you will only be required to pay tax on the remaining £70,000. 

In this week’s Tax Tuesday, we break down the main costs of running your business that you can claim as allowable expenses.

Office costs

Items that you would normally use for less than two years can be claimed as allowable expenses. This includes the stationery that you and your team would use on a day-to-day basis, as well as rent, rates, power and insurance costs.

The stationery that you can claim as allowable expenses are:

  • phone, mobile, fax and internet bills
  • postage
  • stationery (e.g. paper, pens, etc.)
  • printing
  • printer ink and cartridges
  • computer software that’s used for less than two years
  • computer software which requires regular license renewal payments, despite being used for more than two years.

When it comes to rents, rates, power and insurance costs, you can claim for:

  • rent for business premises
  • business and water rates
  • utility bills
  • property insurance
  • security
  • using your home as an office (only the part that’s used for business).

Equipment such as computers or printers which are kept in your business for longer than two years can only be claimed as allowable expenses if you use cash basis accounting. If you use traditional accounting, then they should be claimed as capital allowances. Similarly, you cannot claim expenses or allowances for premises that you have bought. However, expenses for repairs and maintenance can be claimed. For alterations to install or replace equipment, those who use cash basis accounting can claim allowable expenses, whereas those who use traditional accounting will claim capital allowances. 

Travel costs

The nature of your business may mean that you’re required to travel. Whether this is frequently or not, you can claim allowable expenses for:

  • vehicle insurance
  • repairs and servicing
  • fuel
  • parking
  • hire charges
  • vehicle license fees
  • breakdown cover
  • train, bus, air and taxi fares
  • hotel rooms
  • meals on overnight business trips

However, you cannot claim for:

  • non-business driving or travel costs
  • fines
  • travel between home and work.

Staff expenses

If you hire employees to work for your business then there are several allowable expenses that you can claim:

  • employee and staff salaries
  • bonuses
  • pensions
  • benefits
  • agency fees
  • subcontractors
  • employer’s National Insurance
  • training courses related to your business

It’s important to note that you cannot claim for carers or domestic help such as nannies. 

If you are required to purchase uniforms, protective clothing or costumes for yourself or your employees, then you can also claim allowable expenses for these.

Reselling goods

You are able to claim allowable business expenses for:

  • stock 
  • raw materials
  • direct costs from producing goods.

However, you cannot claim for the sale of either goods/materials that were bought for private use, or the depreciation of equipment.

Legal and financial costs

If you seek professional services from external companies, such as legal and accounting, then their fees can count as allowable expenses. Within this, you can claim for the costs of:

  • hiring of accountants, solicitors, surveyors and architects for business reasons
  • professional indemnity insurance premiums

You can also claim certain costs for bank, credit card and other financial charges, including:

  • bank, overdraft and credit card charges
  • interest on bank and business loans
  • hire purchase interest
  • leasing payments
  • alternative finance payments

If you’re using cash basis accounting, you can only claim up to £500 in interest and bank charges.

Insurance policies can also be claimed as allowable expenses. 

You cannot, however, claim for:

  • legal costs of buying property and machinery (if you use traditional accounting, you can claim for these as capital allowances though)
  • fines for breaking the law
  • repayments of loans, overdrafts or finance arrangements

If you use traditional accounting, then you are able to claim for amounts of money that you include in turnover but will never receive. These are known as bad debts and you can only write them off if you’re sure they will not be recovered in the future. 

You cannot claim for:

  • debts not included in turnover
  • debts related to the disposal of fixed assets, for example land, buildings, machinery
  • bad debts that aren’t properly calculated.

Marketing, entertainment and subscriptions

When it comes to spreading the word of your business, you can claim allowable expenses on certain marketing costs. These are:

  • advertising in newspapers or directories
  • bulk mail advertising
  • free samples
  • website costs
  • subscriptions to trade or professional journals
  • subscriptions to trade bodies or professional organisation memberships that are related to the business. 

You cannot claim for:

  • entertaining clients, suppliers and customers
  • event hospitality
  • payments to political parties
  • gym membership fees
  • donations to charity

Training courses

As your business progresses, further training to improve your skills and knowledge could be beneficial. You can claim allowable expenses on such training, as long as it’s related to your business. You cannot claim for training courses that help you:

  • start a new business
  • expand into new areas of business, including anything related to your current business. 

How can we help?

At Harold Sharp, we can help you stay on top of your allowable expense claims. If you would like to seek further advice, then please do not hesitate to get in touch with our Tax Team at tax@haroldsharp.co.uk or call 0161 905 1616