1. Travel Expenses
As a self-employed sole trader, you can make claims for travel expenses, so long as that travel is exclusively for business purposes. I.e. it isn’t simply your regular office commute. Following the same principle, you can claim business expenses for:
- Travel and vehicle insurance
- Fuel costs
- Parking fees
- Tolls and congestion charges
- Vehicle repairs and servicing
- Hire charges
- Breakdown cover
- Taxis and public transport fares
- Meals on overnight business trips
You cannot, however, make a claim for any fines you incur whilst travelling, such as parking penalties. Nor can you take the family for an all-inclusive beano to Benidorm at the leisure of HMRC!
Ensure that you keep records of bills and receipts for anything you wish to claim for (fuel receipts, hotel invoices, etc.), as well as a mileage log. HMRC’s rules on travel expenses can prove complex. So, if you’re unsure on anything, it’s always worth seeking the advice of a specialist self-employed business accountant.
2. Legal & Financial Business Expenses
Accountancy, legal and other professional fees can all be classed as allowable expenses. This is provided that the specialist’s time is spent working on your business affairs, rather than personal issues. This includes the hiring of professional services for business-related purposes. You can also claim for any of your business’s insurance policies (including cover for business premises), as well as lease payments and interest repayments.
When it comes to your accountant supporting you with your personal self-assessment tax return though, you can deduct the cost of their services, so long as they include items such as ‘self-employed income’, ‘property’ and others. If you’re unsure, it’s best to speak to a specialist accountant.
You’re also entitled to claim certain bank charges as allowable business expenses if you’re self-employed. Though, again, they should be for accounts or cards in the name of the business - not yourself. You cannot claim for repayments of personal loans or overdrafts, unless these were taken out due to moneys spent on your business.
3. Property, Equipment & Office Costs
As a self-employed person, you’re entitled to claim certain business expenses if you’re using your home as an office. However, this only applies to the room/s that you use for work. So, unless you’re doing your filing in the downstairs bathroom, it might be worth leaving your new towel rail off your self-assessment for now. You are, though, able to claim a proportion of your costs for things like heating, electricity, council tax and rent or mortgage interest payments. You’re also entitled to tax relief towards the cost of certain home office furnishings and equipment, such as desk chairs, so long as, once again, the ‘asset’ you’re claiming for is in a room that’s used for business.
When it comes to ‘office costs’, depending on your circumstances, you might be allowed to claim for things like security, insurance, and utility bills as well. What’s more, you can also receive capital allowances for anything that’s necessary and essential for your business - reducing your Income Tax bill. This includes computer hardware and software, as well as important equipment, like a printer.
In short, if you have business premises, be it your home or an office space, you can claim business expenses for:
- Business rates
- Water & utility bills
When it comes to broadband and phone lines - mobile or landline - you cannot make a claim, unless your phone line/broadband is used exclusively for business purposes. This is due to the fact that the line/broadband likely serves a dual purpose (both business and personal use). You can, however, claim business expenses for business calls made on that phone line. Though, you will need to be able to demonstrate records of these calls on your phone bill.
4. Employees & Training Expenses
If your self-employed business takes on any new employees, you can claim business expenses for their salaries, pensions, benefits & bonuses. As well as potential agency fees, subcontractor charges, and Employer’s National Insurance costs. Though, you cannot make claims for domestic assistance. So, Jeeves’ salary is strictly off-limits.
The costs of training courses, meanwhile, are claimable if they relate to trade carried out by the business. You must be able to show that the course you’re claiming for directly relates to income generated by your business.
5. Clothing Expenses
You’re unable to claim business expenses for ‘everyday’ items of clothing, such as a fresh suit or a new blouse. However, you’re permitted to claim for things like uniforms, protective clothing, dry cleaning, clothing branded with business logos, and even costumes for actors, performers and entertainers… we’re looking at you Björn Ulvaeus!
It might be stretching it a touch to class prescribed eyewear as ‘clothing’, but you can even make claims for glasses and vision tests. However, this only applies if it’s absolutely necessary for the use of visual display equipment in your duties AND it does not serve a dual purpose. In short, you cannot claim glasses as a business expense unless they’re prescribed purely for visual display use during your time at work.
6. Business Expenses & the Resale of Goods
Unfortunately, when it comes to reselling goods, you cannot make a claim for depreciated equipment. Nor can you claim for goods or materials purchased for private use. So, put that boxset back on the shelf.
The good news, though, is that you can claim expenses for stock (resalable goods), raw materials, and direct costs from the production of goods or produce.
7. Marketing, Subscriptions & Entertainment Expenses
Advertising, marketing, website costs, trade journals, placements in business directories, and memberships/subscriptions to certain business-related organisations are all things that you can claim allowable business expenses for as a self-employed person. So long as the service is exclusively for your business. However, this does not include payments to your favourite cat charity, bowling club, or political party.
Tax relief is also unavailable for the wining and dining of clients in high-end restaurants. Maccy D’s it is then.
8. Charitable Donations
On the point of donating to charity, unlike limited company/small business owners, self-employed sole traders are considered the same legal entity as their business enterprise. So, donations are considered as having been made by the individual. That negates any tax relief that their limited company counterparts may be entitled to. You can find out more about making the most of charitable donations, here.
9. FIVE Things Self-Employed People Should Consider When Claiming Business Expenses
- As a self-employed sole trader, you’ll claim any business expenses when you file your annual self-assessment tax return. In practice, if you earn £35,000-per-year and you claim £5,000 in allowable business expenses, you’ll only get taxed on the remaining £30,000. This is what’s known as your ‘taxable profit’.
- You should only claim for expenses incurred ‘wholly and exclusively’ for the purposes of the trade. If you use an item for both business and personal reasons, you can only claim expenses for the portion that’s used for business.
- If you buy something that your business will use over a number of years, i.e. machinery, you’re entitled to claim tax relief via ‘capital allowances’.
- Simplified expenses are also an option for self-employed sole traders. Particularly those who may not be as fond of complex calculations as we are at Danbro Business. With simplified business expenses, you can ascertain your business’ expenses (for things like home working and vehicle costs) using flat rates, as opposed to calculating your actual business expenditure. Take a look at this free checker on gov.uk to find out if simplified expenses could save your business money. Or, talk to Danbro Business today.
- ALWAYS keep records and receipts of all your business’s income and expenses. You should keep receipts for at least six years after you’ve filed your returns, as HMRC could decide to investigate at any point within this time. When you choose Danbro Business, you’ll have access to exclusive software, which enables you to upload and store receipts - amongst a host of other intelligible features. Find out more.
10. Stake Your Claim with Danbro Business
For a complete guide on business expenses - and whether you can claim tax relief on them - check out this free guide, compiled by FreeAgent’s Chief Accountant, Emily Coltman FCA.
If you’re self-employed and you’d like professional advice or support with your taxes and expenses, join Danbro Business today and find out what our expert team can do for you.
Sam Wright is Danbro’s Marketing Manager. He produces regular content and feature articles on our digital and non-digital channels – and social platforms – for the Danbro Group and its subsidiaries, as well as having responsibility for the Company’s internal and external communications.
His background is in Journalism and Creative Writing, having previously contributed to publications such as The Daily Post, The Lancashire Evening Post, and The Blackpool Gazette.
He is a keen swimmer and avid Manchester United fan (but don’t hold that against him), and he lives in Lancashire with his wife, Sarah.