If you're self-employed in the UK, you'll be responsible for managing your own expenses. Knowing which self-employed expenses you can claim can help reduce your tax bill and keep your business running smoothly.
Expenses for self-employed people can include some of the running costs of your business, but it’s worth noting that this number of allowable business expenses does not include money taken from your business to pay for private purchases. Also, if you run your own limited company, different rules will apply.
In this blog we’ll cover all the self-employed business expenses you can claim as well as self-employed tax deductions that might apply.
We’ve got everything you need to know, including:
- What expenses can I claim as self-employed?
- Self-employed allowable expenses list
- How to claim expenses as self-employed
What Expenses Can I Claim as Self-Employed?
So, what are allowable expenses for self-employed people? Here are some of the most common self-employed expenses in the UK. Travel expenses can include the cost of fuel, parking, and public transport. You can claim these expenses if they are solely for business purposes.
If you purchase equipment such as a computer, printer, or phone for your business, you can claim the full cost of the item as an expense. If the equipment is also used for personal use, you can only claim the proportion of the cost that is used for business.
Marketing expenses can include the cost of creating and distributing marketing materials such as flyers, business cards, and advertisements. You can claim these expenses as long as they are solely for business purposes.
If you have insurance policies such as public liability insurance or professional indemnity insurance, you can claim the cost of these policies as self-employed expenses. If you attend training courses or conferences that are directly related to your business, you can claim the cost of these as expenses. You can also claim the cost of books and other resources that you use to develop your skills.
If you have a business bank account or credit card, you can claim the fees associated with these accounts as allowable expenses for self-employed people. If you have a home office, you can claim a portion of your household bills such as rent, council tax, and utility bills. You can claim a percentage of these bills based on the proportion of your home that you use for your business. To determine the appropriate proportion for tax deductions, there are multiple methods available.
One approach involves calculating based on the number of rooms in your home. For example, if you have a five-room house and one of those rooms is used as your office, you could claim one-fifth of your heating bill as tax-deductible. However, to ensure accurate calculations and prevent over- or under-claiming, it is recommended to consult with your accountant for the most suitable approach. Alternatively, you may choose to utilise simplified expenses for your tax deductions.
You may have heard that claiming business expenses is not possible if you also claim the tax-free trading allowance, which is a £1,000 yearly allowance for those with low self-employment earnings.
If your self-employment earnings are £1,000 or less per year, you are not required to register for self-assessment or notify HMRC, unless requested to do so. However, if you anticipate significant expenses, it may still be beneficial to register.
Additionally, registering can ensure you don't miss out on certain benefits, such as maternity allowance or the opportunity to make Class 2 National Insurance contributions.
Self-Employed Allowable Expenses List
For a more comprehensive look at exactly what you can claim, here is the self-employed allowable expenses list:
You can claim allowable expenses for items typically used for less than two years, such as stationery, rent, rates, power, and insurance costs. For equipment you retain for business use, such as computers or printers, you can claim allowable expenses if you use cash basis accounting or capital allowances if you use traditional accounting. However, any non-business use of premises, phones, or other office resources cannot be claimed.
For stationery, allowable expenses can be claimed for phone, mobile, fax, and internet bills, postage, stationery, printing, printer ink and cartridges, and computer software used by your business for less than two years. You can also claim for computer software if your business regularly renews the license, even if you have used it for more than two years. Capital allowances should be claimed for any other software unless you use cash basis accounting.
Expenses for rents, rates, power, and insurance costs can also be claimed, including rent for business premises, business and water rates, utility bills, property insurance, and security. If you use your home as an office, you can claim only for the part used for business purposes. However, expenses or allowances for buying building premises are not claimable.
Expenses for repairs and maintenance of business premises and equipment can be claimed, and allowable expenses or capital allowances should be claimed for alterations made to install or replace equipment, depending on the accounting method used. Additionally, capital allowances can be claimed for some integral parts of a building, such as water heating systems.
Allowable business expenses that can be claimed include vehicle insurance, repairs and servicing, fuel, parking, hire charges, vehicle licence fees, breakdown cover, train, bus, air and taxi fares, hotel rooms, and meals on overnight business trips. However, non-business driving or travel costs, fines, and travel between home and work are not claimable.
To calculate your car, van or motorcycle expenses, you may be able to use a flat rate (simplified expenses) for mileage instead of actual costs of buying and running your vehicle.
If you purchase a vehicle for your business and use traditional accounting, it can be claimed as a capital allowance. However, if you purchase a car for your business and use cash basis accounting, it can be claimed as a capital allowance only if you are not using simplified expenses. For all other types of vehicles, they can be claimed as allowable expenses.
Allowable business expenses include uniforms, protective clothing required for work, and costumes for actors or entertainers. However, everyday clothing worn for work cannot be claimed.
Allowable business expenses include employee and staff salaries, bonuses, pensions, benefits, agency fees, subcontractors, employer’s National Insurance, and training courses related to your business. However, carers or domestic help such as nannies cannot be claimed as business expenses.
Legal And Financial Costs
Allowable business expenses include accountancy, legal, and other professional fees. You can claim expenses for hiring accountants, solicitors, surveyors, and architects for business purposes, as well as professional indemnity insurance premiums.
However, you cannot claim for legal costs associated with buying property and machinery. If you use traditional accounting, these costs should be claimed as capital allowances. Fines for breaking the law and bank, credit card, and other financial charges cannot be claimed.
You can claim business costs for bank, overdraft, and credit card charges, interest on bank and business loans, hire purchase interest, leasing payments, and alternative finance payments (such as Islamic finance). If you're using cash basis accounting, you can only claim up to £500 in interest and bank charges. Repayments of loans, overdrafts, or finance arrangements cannot be claimed.
Additionally, you can claim for any insurance policy related to your business, such as public liability insurance.
You can claim allowable business expenses for advertising in newspapers or directories, bulk mail advertising (mailshots), free samples and for website costs. You cannot claim for entertaining clients, suppliers and customers or hospitality.
When it comes to subscriptions you can claim for trade or professional journals and trade body or professional organisation membership if related to your business. However, you can’t claims for payments to political parties, gym membership fees or donations to charity - but you may be able to claim for sponsorship payments.
You can include training expenses that are necessary for improving the skills and knowledge required for your business, such as refresher courses, as allowable business expenses. However, the training must be related to your business.
It is not possible to claim expenses for training that is intended for starting a new business venture or expanding into new business areas, or anything else that isn’t related to your current business.
How to Claim Expenses as Self-Employed
So that’s everything you can and can’t claim for, but now you’ll need to know how to claim expenses while self-employed.
To claim self-employed expenses in the UK, you need to keep records of all your business income and expenses. You can then use this information to complete your Self Assessment tax return each year.
Here are the steps to claiming expenses as self-employed in the UK:
- Keep records: Keep accurate records of all your business income and expenses throughout the year. You can use a spreadsheet, accounting software, or a physical record-keeping system.
- Determine what expenses you can claim: Refer to the HMRC guidelines to determine which expenses you can claim. These can include expenses for things like travel, office equipment, and professional fees.
- Calculate your expenses: Add up all the expenses you can claim for the tax year.
- Enter your expenses on your tax return: When completing your Self Assessment tax return, enter your expenses in the relevant section. Make sure to provide a breakdown of your expenses and keep copies of your receipts.
- Submit your tax return: Submit your tax return by the deadline, either online or by post.
- Pay any tax owed or receive a refund: Your tax liability will be calculated based on your total income and expenses. You may need to pay any tax owed, or you may be entitled to a refund if you have overpaid.
We hope you have enjoyed our handy guide to self employed expenses; if you’re looking for more information on self-employed expenses visit Gov.uk for more information.