One of the most important things you want to work out if you become self-employed is what can I claim for? Which expenses will HMRC allow me to claim? And what is not claimable? Our handy guide will take you through ten common business expenses you can claim, and five that you can not.
The most important thing to see if an expenses is allowed to be deducted against your income is this test. Is it wholly and exclusively for business use. HMRC use a lot of wording when describing this “test” of allowable expenses, but it can be simpler when looking at the expenses incurred.
1. Stock & Materials
If you are a self-employed business that deals in goods or materials then these costs of the sale are definitely allowable business expenses. Basically, without these expenses you would not be able to make any sales to customers.
2. Business Premises
Any rent, repairs/maintenance, insurance or utility bills for the business premises are claimable. If you work from home you would need to either calculate the percentage of time and space you use for home working, or use simplified expenses .
Legitimate business travel costs can be claimed if you are self-employed. For example mileage to see customers or for other business purposes. Things like train, bus and taxi costs can also be claimed. If you have to stay overnight at a hotel for business purposes, this can also be claimed.
4. Advertisement & Marketing
Any marketing costs that are not client entertainment (see below) are allowable. For example mailshots, advertising online with Google, Facebook and Linked In, business cards, or even just your web hosting. This can all be claimed. For start up businesses and the newly self-employed, we offer a package . This includes hosting with Siteground , or if you are happy how you are, we can just get you set up with them.
5. Office Expenses & Supplies
This covers things like stationery, postage and printing costs. You may also be able to claim larger purchases of office equipment, but these may need to be claimed as Capital Allowances. Contact us if you need more information.
6. Staff Costs
This may seem obvious, but the costs of employing staff including National Insurance and Pension Contributions are expenses that can be claimed. It is not often that a Self-employed person employs others, but it can happen. If you decide to use a freelancer on a sub contract basis, this can also be claimed.
Any essential work related clothing can be claimed. For example, costumes for actors or protective gear when on a construction site. However the wholly and exclusively for business use would come into play if you tried to claim for daily wear and would most likely be disallowed.
If you are self-employed and a member of a Professional or Trade Organisation, the cost of the subscription to this can be claimed. The same also goes for relevant trade journals you subscribe to.
9. Legal and Financial
If you hire a legal or accounting professional these fees can be claimed. For example a Bookkeeper, Accountant, Surveyor or Solicitor. There is an exclusion when it comes to the cost of someone preparing your Self-employed Self Assessment, but see below for more information. You can also claim the costs of bank, loan and credit card interest and charges. Please note, if you use cash basis accounting, you can only claim up to £500 per year for Interest and Charges.
10. Business Insurance
Whether it is Public Liability or Professional Indemnity Insurance, any work related Business Insurance expenses are claimable.
And now what you can’t claim. This isn’t an exhaustive list, but the five most common queries
1. Travel from home to work
If you have a regular place that you attend for a contract, you can not claim for the mileage or travel between home and that location.
2. Client Entertainment
Unless your client is coming from outside of the UK, any amounts for hosting them or entertaining them (for example meals or drinks out, their accommodation, lunches etc) are not claimable.
3. Paying a Professional to do your Self Assessment
The cost of the Bookkeeper or Accountant doing your Business Bookkeeping and Accounts is claimable, as above. However your Self Assessment is a personal tax return, and if any costs are directly attributable to the Self Assessment itself, this is not claimable.
4. Some Subsistence
This can be a grey areas, even within HMRC. The bottom line is that HMRC state you have to eat to live, so unless you are doing something completely outside your normal business pattern (ie staying overnight at a hotel), you may not be able to claim meals whilst out for work.
5. Payments to Charities & Political Parties
Because these are not wholly and exclusively for work, these are not claimable expenses. However you may be able to claim tax relief on your charity donations due to the Gift Aid Scheme.