Self-employed - What can I claim on my tax return?

So, it's time to do the dreaded tax return!




To help you get it as accurate as possible here are some pointers to the allowable costs that can be claimed on the form.


Some of the costs that usually count as business expenses are:




The no 1 rule from the HMRC is that any business expense item must be purchased & used solely and exclusively for or within the business.

No shared usage between personal and business.





Office expenses

You can claim for items used in your business, that will last less than two years. This includes items like:

  • phone, mobile, fax and internet bills

  • postage

  • stationery

  • printing

  • printer ink and cartridges

  • computer software your business uses for less than two years

  • computer software if your business makes regular payments to renew the licence (even if you use it for more than two years)


Business Equipment

You can also include business equipment that you’ll keep for a longer time, like computers and printers and other computer software, but you may have to claim these as capital allowance if you don’t use the cash accounting method.

If in any doubt seek advice from an accountant or bookkeeper.

Business premises

You can claim expenses for:

  • rent

  • maintenance and repair

  • utility bills

  • property insurance

  • security

You can’t claim expenses for buying or building your business premises.

Home office

If you run your business from home, you can include part of your home utility bills, but you need to work out the proportion of your home that’s used for business. How long you spend working at home on the business is also a factor.

Gov.uk gives an example method of dividing the costs by the number of rooms:

  • you have four rooms in the house, and you use one solely as an office

  • your electricity bill for the year is £800, and each room uses an equal amount of electricity

  • you can divide the bill by four to claim £200 allowable business expenses

If you work from home at least 25 hours a month, you can use simplified expenses which is a flat monthly rate calculated by the government.



Travel

You can claim business-related car or van costs on your tax return, including:

  • vehicle insurance

  • fuel

  • hire charges

  • repairs

  • servicing

  • breakdown cover

Vehicle expenses can be difficult to calculate, so you can use ‘simplified vehicle expenses’, which is a flat rate provided by the government.

You can also include business travel by train, bus, plane or taxi, and hotel rooms and meals during overnight business trips.

Bear in mind that travel for things like meetings and site visits is included, but you can’t claim for the cost of travelling between home and work – so commuting or travelling to your business premises doesn’t count.

Also note that if you take a journey for both personal and business reasons, you must be able to separate out the business cost to be able to include it.

You can’t claim for entertaining clients, suppliers and customers, or event hospitality.

Finally, if you buy a vehicle for your business and use traditional accounting, you can claim it as a capital allowance.

If you use cash basis accounting and buy a car for your business, you can claim it as a capital allowance (if you’re not using simplified expenses). You claim other types of vehicles, like vans, as allowable expenses.

If in doubt on the way you submit your accounts, ask your accountant or bookkeeper.

Stock and materials

You can include the cost of your stock, your raw materials, and the direct costs that arise from producing your goods.

You can’t claim for goods or materials bought for private use or taken from the business. There is a box on the return to add any goods taken from the business for personal use.

Legal and financial costs

If you need to hire a professional like an accountant, a solicitor, a surveyor, or an architect for business reasons, this is an allowable cost.

You can also include bank, overdraft and credit card charges, interest on bank and business loans, hire purchase interest and leasing payments. However, note that if you’re using cash basis accounting, you can only claim up to £500 in interest and bank charges.

Bad Debt

If you use traditional accounting, you can claim money that you won’t receive and don’t think you’ll ever receive (bad debt). That’s because with traditional accounting, you include this debt in your turnover. But you can’t 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 – you may feel that an estimated % of your customer may not pay you, but you cannot claim for estimations, only actual debts, like when a customer goes into administration or refuses to pay and it’s not worth going to court.

  • You can’t claim for debt in this way when using cash basis accounting, because you only record income you’ve received on your tax return.

Finally, you can’t claim fines for breaking the law as business expenses, or for repayments of loans, overdrafts, and other finance arrangements.

Business insurance

You can include the cost of business insurances like, for example:

  • Public liability insurance

  • Employers’ liability insurance

  • Professional indemnity insurance

Marketing

You can claim for the cost of marketing, including magazine/newspaper advertising, Google Ad campaigns, directory listings, mailshots, free samples, and all website costs.

Clothing/PPE

You can include the cost of uniform, necessary protective clothing, but you can’t include the cost of everyday clothing that you wear to work.

This includes face masks and hand sanitisers.

Staff costs

· Employee salaries and other labour costs

· Bonuses

· Employer National Insurance contributions

  • Pension contributions

  • Employee Benefits

  • Recruitment/ agency fees

  • CPD training courses related to your business

Subscriptions

If you have subscriptions to memberships of business-related organisations these are also allowed. Examples are: BPCA, ICO, ISO, & other trade bodies or professional memberships, or journals.


Keeping proof for HMRC

You must keep records of all purchases for your business claimed on your tax return for at least 5 years after your 31st January tax return deadline for that relevant year.



If in any doubt seek advice from an accountant or bookkeeper.

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