Business Expenses

What Expenses Can I Claim on my Self-Assessed Tax Return?

Doodle of a person who is worried and needs help with their business expenses.
Business Expenses – Help Me!

So, you’re finally sitting down to start your self-assessed tax return after procrastinating for a few months. Now you need to work out what your business expenses are for the year, but you’re not sure where to start?

Don’t worry, in this blog post, I will look at:

What is an Expense?

Quite simply, an expense is money you spend to run your business. Your self-assessed tax return asks for this information so HMRC can work out how much tax you need to pay on your profits.

HMRC take your turnover figure and deduct allowable expenses and then work out your tax charge on the rest. This is known as ‘taxable’ profit.

For example, your turnover is £40,000, and you claim £10,000 in allowable expenses. You only pay tax on the remaining £30,000.

You can read more about business expenses in my blog ‘What are Business Expenses?

What is my Turnover?

Turnover is the term used to represent the total income for your business. This includes but is not limited to sales, commission, interest and income from rent or shares. It doesn’t include investments or loans you may have taken.

What is an Allowable Expense?

The term “allowable expense” represents expenses made to run your business, but only includes business purchases. If you’ve used business money to pay for a private purchase, you can’t include this as an expense. It would be classed as “drawings” instead, which is the term used for the money you have taken out of your business for yourself, otherwise known as your wages.

Client entertaining costs are also not an allowable expense.

How do I claim expenses on my self-assessment?

You need to keep records of all your expenses and what they were for. This can be on a spreadsheet, in an app or accounting software package. These records need to be kept for 6 years plus the current year and you will need to consider how they are backed up in case of emergency. You also need to ensure that your records are accurate.

If your turnover is below £83,000, you can choose to put the total figure of all your expenses on your self-assessed tax return. Otherwise, you will need to separate them out into totals for
each of the following categories:

Cost of goods sold

Most service based businesses will have very few, if any, expenses that fall under the ‘cost of goods sold’ category.

This category of expenses covers inventory or stock that you buy from your suppliers to sell to your customers and raw materials you buy to make any products you sell on to your customers.

You can also claim for any direct costs incurred during the production of these items, this might include wastage or damages.

You can’t claim for anything that you’ve bought for personal use.

Car, van and travel expenses

Vehicle running costs can be claimed as expenses, however, if you use your vehicle for both personal and business use, you would only be able to claim the costs incurred when the vehicle was being used for your business. You cannot claim personal use.

There are two ways you can claim for vehicle running costs. You can claim on a proportional basis any costs incurred that are related to the business or you can use a flat rate per mile, otherwise known as ‘simplified expenses’. You can read more about simplified expenses in my blog ‘What are Simplified Expenses?

For both methods, you need to record the mileage travelled and keep these records in case HMRC request to see them.

Proportional Method to Calculate Expenses (E.g Fuel)

Take the full cost for a tank of petrol (£50), divide by the total number of miles travelled (400) and multiply by the numbers travelled for your business (100).

£50 / 400 x 100 = £12.50

Simplified Method to Calculate Expenses (All running costs)

The current flat rates are:

  • Cars and vans – 45p for the first 10,000 miles
  • Cars and vans – 25p for after 10,000 miles
  • Motorcycles – 24p

Using these rates you could claim 100 x 45p = £45 for the 100 miles travelled for your business.

Visit the HMRC website for the latest rates.

Parking fees can also be claimed, but not parking fines or speeding tickets.

And you can claim the cost of hiring a vehicle for business use.

You can claim expenses for all types of travel as long as the reason you are travelling is related to your business.

This includes the cost of your hotel room if you need to stay overnight for your business and your evening meal.

Wages, salaries and other staff costs

You can claim expenses for your employees for:

  • Employee and staff salaries
  • Bonuses
  • Pensions
  • Benefits
  • Agency Fees
  • Subcontractors
  • Employer’s National Insurance

You can’t claim for carers or domestic help e.g. nannies.

Rent, rates, power and other insurance costs

You can claim the rent for your business premises. This includes market stall rent or fees as even though it’s temporary, it’s still your place of business.

Water, gas and electricity bills can also be claimed as well as property insurance and security costs.

Repairs and maintenance of property and equipment

If you need to repair or maintain your place of work, for example replacing a broken window or redecorating, then any costs associated with this can be claimed as expenses.

However, if you decide to build an extension, this would be counted as a ‘Capital’ expense and would not be an allowable expense for the self-assessed tax return.

Accountancy, legal and other professional fees

If you need to hire any professional people, such as accountants (or bookkeepers), solicitors, surveyors and architects for business reasons, you can claim the fees that they charge you.

You can’t claim any legal costs for buying property and machinery. If you use traditional accounting, these would be ‘Capital’ allowances.⠀

You can also claim for Professional Indemnity Insurance and other insurance policies.

Interest, bank, credit card and other financial charges

The following can all be claimed under bank and financial charges:

  • Bank, overdraft and credit card charges
  • Interest on bank and business loans
  • Merchant account fees, such as Paypal and Etsy fees.

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

You can’t claim expenses for repayments of loans, overdrafts or other finance arrangements. If you purchase equipment using hire purchase, you can claim the interest as an expense.

You can also claim leasing payments if you lease equipment for use in your business.⠀

Phone, fax, stationery and other office costs

You can claim for all business related phone, mobile, fax and internet bills. If you work from home, then a proportion of those can be claimed too.

All business postage and packing costs are allowable expenses.

All stationery bought for business use can be claimed, so why not treat yourself to something nice while you’re at it? (for business use only of course).

Computer software can be claimed as an expense if your business will use it for less than 2 years or you make regular payments to renew the licence (e.g. pay a subscription fee).

Printing, printer ink and cartridges can all be claimed.

If you use your printer for personal use, then you would only claim the business proportion of costs as an expense.

The best way to do this is to take the full cost of the item, say a ream of paper (£4.99), and divide it by the number of sheets in the ream (500) and multiply this by the number of pages you have used (eg 4)⠀

£4.99/ 500 * 4 = £0.039⠀

So you could claim 4p for the paper used.⠀

Usage of printer ink would be calculated the same way. If you use cash-based accounting, then printers themselves are an expense too, however, if you use traditional accounting, they would be classed as a capital expense, which is listed elsewhere on the self-assessment.⠀

Other allowable business expenses

This is where everything else goes, i.e. any other business related expenses that can’t be categorised as above.

You can claim training fees provided that the course is entirely for your business. If you are updating your skills, the fees can be claimed.

If you are gaining a new specialisation or qualification that allows you to do something new or different, you are not able to claim these costs as an allowable expense, but you may be able to claim them as capital expenditure if it is an asset to your business.

For example:⠀
Your business is one that creates a product, say project bags. You would be able to claim expenses for training courses that update or improve your sewing skills, such as a course on how to add different fastenings.⠀

If you were to complete a training course on dressmaking, you would not be able to claim that as an expense, as dressmaking is a new specialisation not related to your business.

If you were to undertake a content marketing course, this would be classed as a new skill to benefit your business and would be capital expenditure.

Subscriptions to an online business community are allowable if they are relevant to your business and no other purpose. So, if you can justify that the business community is relevant to your business you are able to claim it.

Costs incurred when advertising your business in newspapers, directories or bulk mail can all be claimed as an expense. This includes Facebook adverts too.

If you give away free samples to your customers, you can claim these as an expense too.

Any business related website costs, such as building a website, domain fees and hosting fees can all be claimed.

You can claim the costs to be a member of a professional organisation or trade body.

If you subscribe to any business related or professional journals, you can claim the subscription costs as an expense.

You can claim expenses for staff uniforms. You can’t claim for everyday clothing even if you wear it for work.

You can also claim expenses for any protective clothing you need to do your job. This includes, for example, painting overalls if you are an artist for a living.

And you can claim costumes for actors or entertainers (but remember, you can’t claim anything for entertaining customers).

Any Other Expenses Questions?

If you have any other questions relating to expenses for your self-assessed tax return you can book a 1 hour session with me or send me an email.

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