If you’re self-employed in the UK, understanding which expenses you can claim is crucial for reducing your tax bill and keeping more of your hard-earned income. HMRC allows self-employed individuals to deduct certain business-related expenses from their taxable profit, but knowing what qualifies as an allowable expense can be tricky.
In this guide, we’ll provide a detailed self-employed allowable expenses list UK to help you confidently manage your finances and avoid missing out on potential savings.
Contents
- What Are Allowable Expenses for Self-Employed in the UK?
- Self-Employed Allowable Expenses List UK
- Expenses You Can’t Claim as a Self-Employed Person
- How to Claim Self-Employed Allowable Expenses
- Final Thoughts on Self-Employed Allowable Expenses List UK
What Are Allowable Expenses for Self-Employed in the UK?
Allowable expenses are costs incurred “wholly and exclusively” for the purpose of running your business. These can include office costs, travel expenses, marketing, and more. You can only claim for business-related use, so any personal portion of expenses must be excluded.
Self-Employed Allowable Expenses List UK
1. Office Costs
Managing office-related expenses effectively is crucial for self-employed individuals, whether you work from home, rent office space, or use a co-working facility. These costs are allowable for tax purposes, provided they are exclusively for business use.
Allowable Office Costs:
- Office Rent and Utilities:
If you rent an office, you can claim the full cost of rent and associated utility bills like electricity, gas, and water. For coworking spaces, the membership or desk hire fee is also allowable. - Home Office Use:
If you work from home, you can claim a proportion of your household expenses, such as:- Heating, electricity, and gas.
- Internet and broadband services.
- Council tax (a portion related to business use only).
For example, if you have a dedicated workspace at home and it accounts for 10% of your home’s floor space, you could claim 10% of relevant bills as allowable expenses.
- Office Supplies:
Any stationery, printer ink, postage, or other consumables used for your business are fully claimable. - Office Equipment:
Items such as laptops, computers, monitors, desks, chairs, and software subscriptions are deductible. If they are also used personally, you’ll need to calculate and claim only the business-use portion.
Home Office Use: Simplified Option vs. Detailed Calculation
HMRC offers two ways to claim for home office use:
- Simplified Flat Rate:
This method involves claiming a set monthly amount based on the number of hours you work from home each month:- £10 for 25-50 hours.
- £18 for 51-100 hours.
- £26 for 101+ hours.
The flat rate is easy to calculate but may not cover all eligible costs if your business uses a significant portion of your home.
- Detailed Calculation:
With this method, you calculate a proportion of your household bills based on the area used for work and the amount of time you use it. For example:- If your home has 5 rooms and you use 1 room exclusively for work, you can claim 20% of household bills.
- If the workspace is shared (e.g., a dining table), you need to adjust for the percentage of time it’s used for business.
Coworking Spaces and Flexible Offices
For self-employed individuals who use coworking spaces or serviced offices, the costs are fully claimable. These may include:
- Desk hire or membership fees.
- Additional services such as meeting room bookings or printing services provided by the coworking facility.
What You Can’t Claim:
- Personal expenses like decorations or furnishings not directly related to the business.
- Mortgage repayments (you can only claim the business portion of interest, not the capital repayment).
- Any costs for areas of the home that are not used for business purposes.
By effectively categorising and tracking your office costs, you can maximise your tax deductions while maintaining compliance with HMRC guidelines. Whether working from home or renting a professional space, ensure you keep receipts and maintain clear records to support your claims.
2. Travel Costs
Travel costs incurred for business purposes can significantly reduce your taxable income, as long as they are directly related to your work. HMRC allows claims for various travel-related expenses, excluding regular commuting to and from your usual place of work. Let’s break down these costs in more detail.
Allowable Travel Costs:
- Vehicle Running Costs:
If you use your car, van, or motorcycle for business purposes, you can claim expenses such as:- Fuel.
- Insurance.
- Servicing and repairs.
- MOT and breakdown cover.
However, you must only claim the portion of these expenses that applies to business use. For example, if 60% of your car usage is for business, you can claim 60% of these costs.
- Mileage Allowance:
Instead of claiming individual vehicle expenses, you can use HMRC’s approved mileage rates:- 45p per mile for the first 10,000 business miles in a tax year.
- 25p per mile for any additional business miles.
This rate is designed to cover all running costs, including fuel, servicing, and wear and tear, making it a simpler option for many self-employed individuals. Keep a mileage log to track your journeys and ensure accuracy.
- Public Transport:
The cost of train, bus, or taxi fares for business trips is fully deductible. This includes trips to meet clients, attend business events, or deliver goods. Ensure you keep tickets or receipts as proof of travel. - Parking Fees:
You can claim parking costs incurred during business trips, such as attending meetings or events. However, parking fines are not deductible, even if incurred during a business activity. - Accommodation:
When travelling for work and staying overnight, hotel or other accommodation expenses can be claimed. Make sure the costs are reasonable and directly related to your business activities. - Subsistence (Meals and Drinks):
If you are away from your usual place of work for business purposes, you can claim the cost of meals and drinks. This includes:- Meals during overnight stays.
- Reasonable refreshments during day-long trips.
Note: Personal meals or entertaining clients at restaurants are not allowable unless part of a genuine business meeting.
Key Considerations for Travel Claims:
- Dual Purpose Journeys: If a journey serves both personal and business purposes, you can only claim the business-related portion. For instance, if you combine a family holiday with a business meeting, only the costs directly related to the meeting are allowable.
- Travel Outside the UK: If your business requires international travel, you can claim costs for:
- Flights and airport transfers.
- Accommodation abroad.
- Meals and local transport related to business activities.
Keep detailed records, as international claims may attract closer scrutiny.
- Regular Commuting: Travel between your home and your regular workplace is not claimable, as it is considered a personal expense. However, trips to temporary workplaces or client sites are deductible.
Record Keeping:
To maximise your travel claims and ensure compliance:
- Maintain a mileage log or use a tracking app for vehicle journeys.
- Keep receipts for public transport, parking, and accommodation.
- Note the purpose of each journey in your records.
By carefully tracking and separating personal and business travel expenses, you can claim legitimate deductions while staying within HMRC’s guidelines. Travel is often a significant cost for the self-employed, so taking full advantage of allowable expenses can make a big difference to your tax bill.
3. Marketing and Advertising
Promoting your business is crucial for growth, and many marketing-related expenses can be deducted to reduce your tax bill. Whether you’re using traditional methods or modern digital strategies, HMRC allows claims for the reasonable costs of business promotion. Here’s a deeper dive into what’s claimable.
Allowable Marketing and Advertising Costs:
- Online Advertising:
Digital platforms are a powerful tool for reaching new customers and maintaining relationships with existing ones. Expenses you can claim include:- Google Ads: Pay-per-click campaigns designed to drive traffic to your website.
- Social Media Advertising: Costs associated with platforms like Facebook, Instagram, LinkedIn, or X.
- SEO Services: Fees paid to optimise your website and content for better search engine rankings.
- Email Marketing Tools: Subscriptions to platforms like Mailchimp or ActiveCampaign.
- Website Costs:
Your website is often the first impression customers have of your business. Expenses related to setting up and maintaining a website are deductible:- Domain Registration: The cost of securing your business’s web address.
- Hosting Fees: Ongoing charges for keeping your site online.
- Web Design and Development: Professional fees for creating or upgrading your site.
- E-commerce Platforms: Subscription fees for services like Shopify or WooCommerce.
- Traditional Advertising:
While digital marketing dominates, traditional advertising methods remain effective for certain businesses. Claimable costs include:- Print Advertising: Ads in newspapers, magazines, or local directories.
- Flyers and Posters: Design, printing, and distribution costs.
- Radio and TV Ads: Production and airtime costs, provided they relate solely to your business.
- Networking and Trade Shows:
Building connections and showcasing your business can be a vital part of your marketing strategy. Deductible expenses include:- Event Fees: Costs for attending networking events, conferences, or exhibitions.
- Booth Costs: Fees for setting up a stall at trade shows or industry fairs.
- Promotional Materials: Branded items like brochures, banners, or merchandise distributed at events.
- Content Creation:
Content marketing is a popular and effective way to engage audiences. Allowable costs include:- Copywriting and Blogging: Hiring writers or agencies to create content for your website or marketing materials.
- Video Production: Costs for producing promotional videos or tutorials.
- Graphic Design: Professional design services for social media, ads, or print materials.
Key Considerations for Marketing Claims:
- Client Entertainment: Costs associated with entertaining clients (e.g., meals or drinks) are not allowable as they are considered personal expenses, even if they contribute to your business relationships.
- Sponsorship: If your business sponsors an event or organisation, the expense is deductible provided it’s directly related to promoting your business (e.g., your logo displayed on materials).
- Charitable Donations: While donations are generally not deductible as marketing expenses, sponsorships with a promotional angle may qualify.
- Reasonableness: Ensure your marketing spend is proportionate to your business size and sector. Extravagant or personalised promotions (e.g., gifts not branded with your business logo) may be disallowed.
Record Keeping:
To maximise your marketing claims:
- Retain invoices or receipts for all promotional activities.
- Keep digital records of ad spend (e.g., screenshots of Google Ads invoices).
- Document the business purpose of each expense, such as campaign goals or target audiences.
Investing in marketing is essential for growth, and claiming these allowable expenses can reduce the financial burden while ensuring your business reaches its full potential. By leveraging both traditional and digital strategies, you can create a robust marketing approach and optimise your tax efficiency.
4. Professional Services
Running a successful self-employed business often involves enlisting the expertise of professionals to ensure smooth operations and compliance with regulations. Fortunately, many costs associated with hiring professional support can be claimed as allowable expenses, reducing your overall tax liability. Here’s a detailed breakdown.
Allowable Professional Services Costs:
- Accountant and Bookkeeper Fees:
Maintaining accurate financial records is crucial for any business. The following expenses can be claimed:- Accountant Fees: Costs for preparing and submitting tax returns, financial statements, and compliance with HMRC requirements.
- Bookkeeping Services: Fees for organising daily financial transactions and managing cash flow.
- Payroll Services: Costs for managing staff wages, PAYE, and National Insurance contributions (if you employ others).
- Legal Fees:
Legal support related to business operations is deductible. This includes:- Contract Drafting and Review: Creating agreements with suppliers, clients, or contractors.
- Debt Recovery: Legal expenses incurred to recover money owed to your business.
- Intellectual Property: Costs related to registering trademarks, copyrights, or patents.
- Business Formation: Legal fees for setting up a limited company or registering your self-employment.
Note: Legal fees related to personal disputes or fines (e.g., parking fines or late tax filing penalties) are not claimable.
- Consultants and Contractors:
Hiring external experts to improve or support your business is a common expense. Claimable costs include:- Business Consultants: Fees for professionals providing advice on strategy, growth, or market analysis.
- IT Specialists: Support for software implementation, cybersecurity, or troubleshooting.
- Marketing Agencies: Costs for outsourced advertising or branding campaigns.
- Freelancers: Payments to graphic designers, content creators, or virtual assistants.
- Training and Professional Development:
While not strictly a “professional service,” training directly related to improving your business skills is also deductible. Examples include:- Workshops or Courses: Business, marketing, or technical skills development.
- Memberships: Subscriptions to professional organisations or trade associations.
Key Considerations for Professional Services Claims:
- Personal vs Business Costs: Only fees directly related to business activities are allowable. For instance, personal legal advice or tax planning unrelated to your business is not deductible.
- One-Time vs Ongoing Services: Both one-off legal or consulting fees (e.g., registering a business) and recurring services (e.g., monthly bookkeeping) are eligible.
- Reasonable Costs: While HMRC doesn’t cap professional services expenses, ensure fees are appropriate for the work undertaken and necessary for your business.
5. Insurance
Safeguarding your business against risks is not just prudent—it’s often essential. Fortunately, HMRC recognises the importance of insurance in protecting your operations and allows many related costs to be claimed as allowable expenses. Here’s a deeper look at the types of insurance you can claim and why they matter.
Types of Insurance You Can Claim:
- Public Liability Insurance
This covers claims made by third parties for injury or damage caused by your business.- Examples: A customer slips in your shop, or a contractor damages a client’s property during a job.
- Essential for: Businesses with public-facing premises, tradespeople, and event organisers.
- Professional Indemnity Insurance
Protects against claims of negligence, errors, or omissions in the professional services you provide.- Examples: A client accuses you of providing incorrect advice that results in financial loss.
- Essential for: Consultants, accountants, designers, and other service-based professionals.
- Employer’s Liability Insurance
A legal requirement if you employ staff, this covers claims made by employees for work-related injuries or illnesses.- Examples: An employee injures themselves using equipment at your workplace.
- Essential for: Employers of full-time, part-time, or temporary staff.
- Contents Insurance for Business Premises
Covers the cost of replacing or repairing business equipment in case of theft, fire, or other damage.- Examples: Office furniture, computers, tools, and machinery.
- Essential for: Any business with a physical workspace or valuable equipment.
- Specialist Insurance Policies
Depending on your industry, you might also need to claim additional policies, such as:- Cyber Insurance: Covers data breaches, hacking, and other cyber threats.
- Stock Insurance: Protects inventory against theft or damage.
- Vehicle Insurance: For company cars or vans (business use portion only).
- Income Protection Insurance: Covers lost income if illness prevents you from working (if directly tied to your business).
Why Claiming Insurance Costs Matters:
Insurance not only protects your business from unforeseen risks but also contributes to its operational stability. By claiming these expenses, you lower your taxable income and reduce the financial burden of staying protected.
Tips for Claiming Insurance Costs:
- Keep Policies Separate:
- Ensure personal and business insurance policies are distinct. HMRC only allows claims for business-related coverage.
- For combined policies (e.g., home office contents insurance), claim the business-use portion only.
- Document Coverage:
- Retain policy documents, invoices, and payment receipts.
- Note the purpose of the insurance and how it supports your business operations.
- Stay Compliant:
- Ensure you have the required coverage, especially employer’s liability insurance if you employ staff, as HMRC can penalise non-compliance.
6. Staff Costs
If you employ staff or hire subcontractors to support your business, HMRC allows you to claim various staff-related expenses. These costs are vital for maintaining and growing your business, and deducting them from your taxable income can significantly reduce your overall tax liability.
Allowable Staff Costs:
- Salaries and Wages
- Payments made to employees or subcontractors for their work.
- Includes bonuses, overtime, and commissions tied to business operations.
- Ensure all payments are accurately recorded in your payroll system and comply with employment law.
- Employer National Insurance Contributions (NICs)
- The NICs you pay as an employer for your staff’s salaries above the earnings threshold.
- These are mandatory and deductible, helping offset the additional costs of employing staff.
- Pension Contributions
- Contributions you make towards employees’ pensions under the workplace pension scheme.
- Includes mandatory contributions under auto-enrolment as well as any additional voluntary contributions you choose to make.
- Employee Training Costs
- The cost of professional development, such as courses, certifications, and workshops.
- The training must directly relate to your business and enhance the skills of your employees for their roles.
- Other Staff Expenses
- Uniforms: If required for work and not considered everyday clothing.
- Work-related travel: For example, reimbursing employees for mileage or public transport when on business trips.
- Health and safety measures: Costs for training and equipment to ensure workplace compliance.
Benefits of Claiming Staff Costs:
- Reduces Taxable Income
Deducting these expenses lowers your taxable profits, which can lead to substantial tax savings. - Supports Business Growth
Investing in your team’s training and development helps improve productivity and business efficiency, which translates to long-term growth. - Compliance and Retention
Meeting obligations like employer NICs and pension contributions ensures compliance with employment regulations and boosts employee satisfaction and retention.
Tips for Claiming Staff Costs:
- Accurate Record-Keeping
- Keep detailed payroll records, including payslips, NICs, and pension contributions.
- Document invoices for subcontractors and contracts for employees.
- Stay HMRC-Compliant
- Use HMRC’s Real Time Information (RTI) system for payroll reporting.
- Ensure pension contributions are in line with auto-enrolment requirements.
- Training Relevance
- Verify that training expenses are directly related to your business needs to qualify as allowable expenses.
- Retain course descriptions, invoices, and proof of attendance.
- Separate Business and Personal Payments
- Ensure any reimbursements or benefits provided to employees are solely for business-related activities.
Example:
Scenario:
You run a small graphic design agency with two employees. You pay:
- Salaries and wages: £50,000 annually.
- Employer NICs: £5,000.
- Pension contributions: £2,500.
- Training courses: £1,000 (e.g., Adobe software workshops).
Allowable Claim:
Total claimable staff costs amount to £58,500, significantly reducing your taxable income.
7. Training and Development
If you employ staff or hire subcontractors to support your business, HMRC allows you to claim various staff-related expenses. These costs are vital for maintaining and growing your business, and deducting them from your taxable income can significantly reduce your overall tax liability.
Allowable Staff Costs:
- Salaries and Wages
- Payments made to employees or subcontractors for their work.
- Includes bonuses, overtime, and commissions tied to business operations.
- Ensure all payments are accurately recorded in your payroll system and comply with employment law.
- Employer National Insurance Contributions (NICs)
- The NICs you pay as an employer for your staff’s salaries above the earnings threshold.
- These are mandatory and deductible, helping offset the additional costs of employing staff.
- Pension Contributions
- Contributions you make towards employees’ pensions under the workplace pension scheme.
- Includes mandatory contributions under auto-enrolment as well as any additional voluntary contributions you choose to make.
- Employee Training Costs
- The cost of professional development, such as courses, certifications, and workshops.
- The training must directly relate to your business and enhance the skills of your employees for their roles.
- Other Staff Expenses
- Uniforms: If required for work and not considered everyday clothing.
- Work-related travel: For example, reimbursing employees for mileage or public transport when on business trips.
- Health and safety measures: Costs for training and equipment to ensure workplace compliance.
Benefits of Claiming Staff Costs:
- Reduces Taxable Income
Deducting these expenses lowers your taxable profits, which can lead to substantial tax savings. - Supports Business Growth
Investing in your team’s training and development helps improve productivity and business efficiency, which translates to long-term growth. - Compliance and Retention
Meeting obligations like employer NICs and pension contributions ensures compliance with employment regulations and boosts employee satisfaction and retention.
Tips for Claiming Staff Costs:
- Accurate Record-Keeping
- Keep detailed payroll records, including payslips, NICs, and pension contributions.
- Document invoices for subcontractors and contracts for employees.
- Stay HMRC-Compliant
- Use HMRC’s Real Time Information (RTI) system for payroll reporting.
- Ensure pension contributions are in line with auto-enrolment requirements.
- Training Relevance
- Verify that training expenses are directly related to your business needs to qualify as allowable expenses.
- Retain course descriptions, invoices, and proof of attendance.
- Separate Business and Personal Payments
- Ensure any reimbursements or benefits provided to employees are solely for business-related activities.
Example:
Scenario:
You run a small graphic design agency with two employees. You pay:
- Salaries and wages: £50,000 annually.
- Employer NICs: £5,000.
- Pension contributions: £2,500.
- Training courses: £1,000 (e.g., Adobe software workshops).
Allowable Claim:
Total claimable staff costs amount to £58,500, significantly reducing your taxable income.
8. Stock and Materials
For businesses in industries that depend on stock, raw materials, or products for resale, these expenses are critical to operations. HMRC allows self-employed individuals to claim these costs as allowable expenses, provided they are directly related to the business.
Allowable Inventory and Raw Material Costs:
- Purchases of Stock or Goods for Resale
- Items bought specifically to sell to customers, whether as part of a retail, wholesale, or e-commerce business.
- Examples include clothing for an online shop, books for a bookstore, or tools for a hardware store.
- Raw Materials for Production
- Materials used in the creation or manufacturing of your products.
- Examples include fabrics for a tailor, wood for a carpenter, or flour and sugar for a baker.
- Delivery Costs for Business Purchases
- Fees paid for transporting goods or materials to your premises or directly to customers.
- This includes courier charges, freight costs, or postal services for shipping goods purchased for the business.
Key Considerations:
- Tracking Inventory Costs
- Record all purchases and keep detailed receipts or invoices.
- Ensure you account for the value of any stock on hand at the end of the tax year, as HMRC requires this for your Self Assessment tax return.
- Consumables and Wastage
- Include consumables like packaging materials, labels, or tape as part of your claim.
- If some materials are wasted during production, these are still allowable as long as the purchase was made for business use.
- Excluded Items
- Personal use items or goods not directly related to your business cannot be claimed.
Benefits of Claiming Inventory and Raw Material Costs:
- Reduces Taxable Profits
Claiming these expenses lowers your taxable income, leading to significant tax savings. - Improves Cash Flow
Accurately claiming all relevant expenses ensures your business retains more of its earnings. - Simplifies Financial Planning
By tracking inventory and material costs, you can better manage stock levels and predict future expenses.
Tips for Claiming Inventory and Raw Materials:
- Keep Detailed Records:
- Maintain purchase invoices, delivery notes, and receipts.
- Use accounting software to track stock levels and associated costs.
- Separate Business and Personal Expenses:
- If you use raw materials for both personal and business purposes, claim only the portion used for business.
- Monitor Stock Levels:
- Conduct regular stock checks to avoid over or under-claiming inventory expenses.
- Adjust your claims for unsold stock or returned items at year-end.
- Include All Delivery Costs:
- Don’t forget to add courier fees, freight charges, or shipping costs associated with inventory purchases.
Example:
Scenario:
A self-employed jewellery maker creates custom necklaces and bracelets. Their allowable expenses include:
- Silver Chains: £800.
- Gemstones and Beads: £500.
- Courier Costs for Stock Delivery: £50.
- Packaging Materials: £100.
Total Allowable Claim:
£1,450, which reduces their taxable profit for the year.
9. Repairs and Maintenance
Maintaining your business premises and equipment is essential for smooth operations. HMRC allows self-employed individuals in the UK to claim the costs of repairs and maintenance as allowable expenses, provided they are directly related to the business.
Allowable Repairs and Maintenance Costs:
- Property Maintenance
- Costs to repair or maintain business premises, such as:
- Fixing a leaky roof.
- Painting or decorating a workspace.
- Plumbing or electrical repairs.
- If you work from home, you can claim a proportion of property maintenance expenses based on the business use of your home.
- Costs to repair or maintain business premises, such as:
- Equipment Repairs
- Costs incurred to repair business equipment, such as:
- Fixing computers or laptops.
- Repairing industrial machinery.
- Servicing tools or devices used in daily operations.
- Costs incurred to repair business equipment, such as:
- Replacement of Tools and Machinery
- Replacing tools, machinery, or other essential equipment that cannot be repaired.
- Examples include replacing broken saws for a carpenter or damaged mixers for a baker.
Key Considerations:
- Distinction Between Repairs and Improvements
- Repairs and maintenance are allowable expenses.
- Improvements (e.g., adding an extension or upgrading equipment) are treated as capital expenses and must be claimed through capital allowances.
- Personal vs. Business Use
- For shared-use equipment or premises (e.g., a home office), you can only claim the business-use proportion of the repair costs.
- Excluded Costs
- Repairs to personal items or non-business-related equipment cannot be claimed.
Benefits of Claiming Repairs and Maintenance Costs:
- Preserve Business Efficiency
Regular maintenance ensures equipment runs smoothly and premises remain safe, avoiding costly downtime. - Reduce Taxable Profits
Claiming these expenses lowers your taxable income, potentially resulting in significant tax savings. - Extend Equipment Lifespan
Regular repairs and maintenance can prolong the life of your tools and machinery, reducing the need for frequent replacements.
Tips for Claiming Repairs and Maintenance Costs:
- Keep Detailed Records:
- Retain all invoices, receipts, and documentation for repairs and maintenance work.
- Allocate Proportions for Shared Use:
- If repairs relate to a home office or shared-use tools, calculate the portion attributable to business use.
- Track Equipment Lifespan:
- Keep a log of repairs and replacements to manage depreciation and plan for future investments.
Example:
Scenario:
A self-employed graphic designer operates from a dedicated office space in their home and uses high-spec equipment. Their allowable repairs and maintenance costs include:
- Painting the Office Walls: £200 (proportioned for business use).
- Laptop Screen Repair: £150.
- Replacement of Printer: £300.
Total Allowable Claim:
£650, directly reducing their taxable profits.
10. Bank and Finance Charges
Effectively managing your business finances often comes with associated costs. Self-employed individuals in the UK can claim various bank and finance charges as allowable expenses, provided they are directly related to their business operations.
Allowable Bank and Finance Charges:
- Bank Charges on Business Accounts
- Fees incurred for maintaining business bank accounts, such as:
- Monthly account maintenance fees.
- Charges for transactions like BACS payments or overdraft facilities.
- Fees for issuing business cheques or setting up direct debits.
- Fees incurred for maintaining business bank accounts, such as:
- Interest on Business Loans or Credit Cards
- Interest paid on borrowing directly used for business purposes, including:
- Business loans for equipment or stock purchases.
- Credit card interest on business expenses.
- Finance agreements used for business growth or day-to-day operations.
- Note: Personal borrowing interest cannot be claimed, even if some of it indirectly benefits the business.
- Interest paid on borrowing directly used for business purposes, including:
- Leasing Costs for Equipment
- Lease or hire purchase agreements for essential business equipment, such as:
- Photocopiers, printers, or computers.
- Vehicles or machinery used exclusively for business purposes.
- Lease or hire purchase agreements for essential business equipment, such as:
Key Considerations:
- Business-Only Expenses:
- Claims must strictly relate to business activities. For instance, interest on a personal loan cannot be claimed, even if part of the funds is used for business purposes.
- Record Keeping:
- Maintain detailed records of bank charges, loan agreements, and lease contracts to substantiate your claims.
- Capital Expenditure:
- Leasing costs are allowable as expenses, but outright purchases of equipment may need to be claimed under capital allowances.
Benefits of Claiming Bank and Finance Charges:
- Reduce Taxable Income:
- Claiming these costs lowers your taxable profit, potentially resulting in a smaller tax bill.
- Support Business Growth:
- Accessing loans or leasing agreements becomes more cost-effective when you can claim related expenses.
- Simplify Financial Management:
- Recognising these charges as allowable expenses helps streamline business accounting.
Tips for Claiming Bank and Finance Charges:
- Open a Dedicated Business Account:
- Separating business and personal finances makes it easier to track and claim business-related bank charges.
- Keep Statements and Agreements:
- Retain copies of bank statements, loan agreements, and leasing contracts to demonstrate the business purpose of these costs.
- Avoid Overclaims:
- Only claim the proportion of charges that directly relate to business use. For shared accounts or loans, calculate the business-use percentage.
Example:
Scenario:
A freelance architect manages their business finances through a dedicated business bank account. They also lease a high-performance laptop and use a business credit card for expenses.
Allowable Bank and Finance Costs:
- Monthly business bank account fee: £10.
- Business credit card interest: £50.
- Laptop leasing cost: £60/month.
Total Monthly Claim:
£120, directly reducing their taxable profits.
11. Utilities and Phone Costs
Keeping your business connected and operational involves several essential expenses. As a self-employed individual in the UK, you can claim a range of utilities and communication costs, provided they are directly related to your business.
Allowable Utilities and Phone Costs:
- Business Phone and Internet Bills
- Mobile Phones:
- Entire phone bill if the device is used solely for business.
- A proportion of the bill if the phone is used for both personal and business purposes (e.g., 70% for business and 30% personal).
- Landlines:
- Line rental and call charges if the landline is exclusively used for business.
- For a shared home landline, claim only the business-related calls.
- Broadband/Internet Costs:
- If your broadband connection is shared between personal and business use, calculate and claim a fair percentage based on actual usage.
- Mobile Phones:
- Utility Bills for Business Premises
- Electricity, Gas, and Water Bills:
- Fully claimable for a dedicated business property.
- If you work from home, claim a proportion of household utility bills based on business usage. For example:
- Total square footage of your home versus the workspace area.
- Number of hours the workspace is used for business.
- Heating and Lighting:
- Applicable for business premises or home office space.
- Electricity, Gas, and Water Bills:
Key Considerations:
- Accurate Proportions:
- For shared home utilities, ensure you calculate the business portion accurately. Use HMRC’s flat rate for simplicity or a detailed calculation based on hours worked and workspace size.
- Document Usage:
- Keep records of bills, contracts, and calculations to justify the claim during potential HMRC reviews.
- Exclusivity Rules:
- Only claim full costs if the utility or service is exclusively used for business purposes.
Benefits of Claiming Utilities and Phone Costs:
- Tax Relief on Essential Expenses:
- Reducing taxable profits by claiming these operational costs helps manage overall tax liability.
- Improved Cash Flow:
- Maximising claimable expenses can free up funds for reinvestment in other areas of the business.
- Support for Remote Work:
- Self-employed individuals working from home can still claim significant portions of their utility and communication costs.
Example:
Scenario:
A freelance graphic designer works 40 hours a week from a home office, occupying 20% of their home’s total space. They also use a dedicated mobile phone for business purposes.
Allowable Expenses:
- Broadband Bill: £50/month; business use = 70% → £35 claimable.
- Electricity Bill: £100/month; business use = 20% → £20 claimable.
- Mobile Phone Bill: £30/month; business use = 100% → £30 claimable.
Total Monthly Claim:
£85, directly reducing taxable profits.
Tips for Claiming Utilities and Phone Costs:
- Use HMRC’s Simplified Flat Rate:
- For home office expenses, HMRC provides a flat rate based on the number of hours worked, reducing the need for detailed calculations.
- Keep Itemised Bills:
- Where possible, use itemised billing to easily separate business and personal usage.
- Invest in Business-Only Services:
- Using separate phone lines or internet services for business ensures full claimability and simplifies record-keeping.
Expenses You Can’t Claim as a Self-Employed Person
While there are many allowable expenses that can reduce your tax liability, some costs are explicitly excluded by HMRC. These are typically expenses deemed personal or unrelated to your business operations. Below is a guide to the common costs that cannot be claimed as tax-deductible expenses.
1. Personal Expenses
HMRC strictly prohibits claiming personal or private costs as business expenses unless there’s a clear business-related purpose.
- Examples of Non-Allowable Personal Expenses:
- Clothing: Everyday wear, even if it’s used for work, cannot be claimed.
- Exception: Protective clothing (e.g., helmets, safety boots, or uniforms) is allowable.
- Holidays or Personal Travel: Costs associated with personal trips are not deductible, even if partially combined with a business trip.
- Clothing: Everyday wear, even if it’s used for work, cannot be claimed.
2. Client Entertainment
While building relationships with clients is crucial, HMRC does not allow tax relief for entertainment costs.
- Examples of Non-Allowable Client Entertainment:
- Meals or drinks with clients.
- Tickets for sporting events, concerts, or hospitality packages.
- Gifts, unless they meet HMRC’s strict criteria for allowable business gifts (e.g., low-value promotional items).
3. Fines or Penalties
Any fines or penalties incurred, whether due to non-compliance or other reasons, cannot be claimed.
- Examples of Non-Allowable Fines:
- Parking tickets or speeding fines while driving for business purposes.
- Penalties for late tax submissions or incorrect filings.
4. Loan Capital Repayments
While you can claim interest on business loans or credit card debt, the capital repayments themselves are not deductible.
- Examples:
- The principal amount repaid on a business loan cannot be claimed.
- Only the interest portion of the repayments qualifies as an allowable expense.
Why These Expenses Aren’t Deductible
HMRC’s primary rule for allowable expenses is that they must be “wholly and exclusively” for business purposes. If an expense serves a dual purpose (business and personal) or falls outside the scope of business activity, it is typically excluded.
Tips for Avoiding Non-Allowable Expense Claims
- Maintain Clear Records:
- Keep itemised receipts and invoices for all expenses to distinguish between personal and business-related costs.
- Use Separate Accounts:
- Operating a dedicated business bank account or credit card can help ensure a clear boundary between personal and business spending.
- Consult with a Tax Professional:
- An accountant can help you identify allowable expenses and avoid making mistakes that could result in penalties or audits.
What Happens If You Claim Non-Allowable Expenses?
Claiming non-deductible expenses can lead to penalties, especially if HMRC identifies inaccuracies during an audit. Errors may result in:
- Repayment of underpaid taxes.
- Additional fines or interest on incorrect claims.
- Potential damage to your credibility with HMRC.
By staying informed about what you can and cannot claim, you can confidently manage your business expenses and remain compliant with HMRC regulations.
How to Claim Self-Employed Allowable Expenses
Claiming your self-employed allowable expenses effectively can make a significant difference to your tax bill. Here’s how to ensure you claim correctly and maximise your tax relief:
1. Keep Accurate Records
The foundation of a successful expense claim lies in meticulous record-keeping. HMRC requires you to keep detailed evidence of your business expenses.
- What to Keep:
- Receipts for purchases (physical or digital).
- Invoices for goods or services.
- Bank statements showing business-related transactions.
- Mileage logs for business travel.
- Utility bills for business premises or home office use.
- Pro Tip: Organise your records into categories (e.g., travel, marketing, office costs) to streamline tax return preparation.
2. Use Accounting Software
Simplify tracking your expenses with reliable accounting tools. These platforms automatically categorise expenses, generate reports, and reduce the chances of errors.
- Recommended Software:
- QuickBooks: Tracks expenses, invoices, and VAT for self-employed individuals.
- FreeAgent: Perfect for small business owners, it integrates seamlessly with HMRC.
- Apron: Specifically designed for UK self-employed professionals, helping with expenses and tax submissions.
- Why Use Software?
- Automates calculations and categorisation.
- Reduces the risk of missed claims.
- Makes filing your Self Assessment faster and easier.
3. Submit Through Your Self Assessment
Your allowable expenses are claimed as part of your annual Self Assessment tax return.
- Steps:
- Log into Your HMRC Account: Ensure you’re registered for Self Assessment.
- Complete the “Self-Employment” Section: List your business income and expenses.
- Record Your Expenses Accurately:
- HMRC provides predefined categories for expenses (e.g., travel, marketing, utilities).
- Ensure expenses are “wholly and exclusively” for business use to avoid rejections.
- Double-Check Totals: Review your entries before submission.
- Pro Tip: Submit your Self Assessment before the deadline (31 January) to avoid late penalties.
4. Hire a Professional Accountant
Navigating expenses can be complex, especially with changing HMRC rules. A qualified accountant can help you:
- Identify every eligible expense, ensuring you don’t miss anything.
- Handle complex expense categories (e.g., partial home office claims).
- Ensure your Self Assessment is error-free and compliant with HMRC.
- Benefits of Hiring an Accountant:
- Saves time and reduces stress.
- Optimises your expense claims to maximise tax relief.
- Provides peace of mind knowing your finances are handled professionally.
Final Thoughts on Self-Employed Allowable Expenses List UK
Understanding and managing your allowable expenses is a cornerstone of effective tax planning for self-employed individuals. With this self-employed allowable expenses list UK, you’re better equipped to claim legitimate expenses, reduce your taxable income, and optimise your financial strategy.
Key Takeaways:
- Always ensure expenses are “wholly and exclusively” for business use to meet HMRC’s criteria.
- Maintain thorough records of receipts, invoices, and bank statements to support your claims.
- Use accounting tools or professional services to simplify the process and minimise errors.
Tax efficiency isn’t just about saving money. It’s about keeping your business sustainable and compliant. By proactively managing your expenses, you can focus on growing your business without financial surprises.
Need Assistance?
Navigating the complexities of self-employed taxes doesn’t have to be overwhelming. Wainwrights Accountants can help you maximise your allowable expense claims and craft a tax plan tailored to your business needs.
👉 Contact us today for expert advice and support with your self-employed finances. Let’s make your tax journey smoother and more profitable!
