When it comes to self-assessment tax return it easy to assess your total income. However, it is not easy to claim most of your expenses. At Tax Care we offer a free initial consultation for self-employed people. We encourage you to prepare and submit your tax return and tell you how you are benefitted by Self-Employed Expense or Sole-Trader Guide. However, you will receive more benefits than the actual cost you pay at Tax Care. Please note that we have drafted below just for demonstration purposes only. Please feel free to contact 0121 227 8564 for free consultation.
What will you know from this post of taxcare.org.uk?
- What are the allowable expenses for Self-Employed Expense or Sole-Trader Guide in the UK?
- Which self-employed expenses are allowable expenses?
What business expenses can I claim as a Sole Trader?
Accounting and Professional Fees for a Self-Employed or Sole-Trader
- Advertising & marketing
- Bank interest & overdraft charges
- Computer equipment and electronics For private and business use
- Second-hand equipment brought into a business
- Food and drink
And finally, you will know Why Tax Care Accountants for Self-Employed Expense?
Which self-employed expenses are allowable expenses?
When you’re completing your tax return, these are some of the costs that usually count as allowable business expenses.
What business expenses can I claim as a Sole Trader?
As a sole trader, your business will naturally incur running costs. The good news is that many of these running costs can be claimed as business expenses, meaning you’ll pay less tax and get to keep more of your hard-earned money.
Accounting and Professional Fees:
All legal and professional fees are allowable expenses and you are allowed to claim those Self-Employed expenses. However, you cannot claim for the expenses for a personal or family matters
Advertising & marketing
Any expenses incurred in your business advertising can be claim as an expense. Please note that, expense must be incurred for wholly exclusively business purposes.
Bank interest & overdraft charges
Bank interests and overdraft charges can be claimed depending on the type of account you have. If you have a personal account, you may claim partial amount of the bank charges. If you have a business account you can claim the full amount for tax relief. It is one of the best Self-Employed Expense or Sole-Trader Guide.
If you are Self-Employed and want to know Expense or Sole-Trader Guide You can only claim if you are using for business purpose. If you are using from home you can claim proportionately.
Business use of home
You can use a simplified flat-rate allowance to claim or you can claim some of the expenses. Please contact your accountant if you are not sure which option is good for you.
You can get tax relief on some charitable donations, but they aren’t included in your business accounts as a cost. Instead, the donations go in the main section of your tax return.
Unfortunately, you cannot claim childcare expense as you have spent for personal perpose.
Generally, claiming for any clothing that is (or could be) part of an “everyday wardrobe” is not allowable – so if you have to buy a suit for work but it could be worn elsewhere, you cannot claim for the cost of the suit.
Computer equipment and electronics
For private and business use
If you buy new computer equipment that you’re going to use partly for work and partly for personal use, you have to work out how much you’re going to use it for business, and then include only that proportion of the cost in your accounts.
Solely for business use
If you buy computer equipment that’s just going to be used for your business, you’ll be able to claim tax relief on the full cost of the equipment as a capital asset.
Private equipment brought into a business
If you already own a computer, office chair, etc and want to bring it into your business, you can claim tax relief for its market value at the point you brought it into the business.
Check eBay for similar items and then include that
Don’t forget that if you are going to carry on using the equipment privately too, you have to work out how much you’re going to use it for business, and then include only that proportion of the cost in your accounts.
Second-hand equipment brought into a business
If you buy a piece of equipment second-hand, you can still claim it as a capital asset at the cost you bought it for because the equipment is new to you. Don’t forget that unless you have a VAT receipt and are VAT registered, you can’t reclaim VAT on second-hand equipment. It is also a good Self-Employed Expense or Sole-Trader Guide.
Council Tax (home)
If you work from home, you can claim a proportion of your Council Tax cost.
Credit card charges
You cannot claim your personal credit card charges as a business expense.
See: Bank interest and overdraft charges
HMRC says that sole traders and partners can’t claim tax relief on business journeys undertaken by bicycle. If you employ anyone, then your employees can claim tax relief on business bicycle travel – but you can’t!
Some dogs (and other animals) are classed as
“working animals”, for example, farm working dogs,
gamekeepers’ spaniels, police dogs, or army bomb
These working animals are treated in the business books as capital assets that qualify for capital allowances, and feeding and caring for them as tax-deductible expenses. So you could put food for these animals, veterinary fees and so forth into the company’s profit and loss account as business costs, and save tax.
If you work from home, you can claim tax relief on a percentage of your electricity costs, based on how much you use your home for business.
You can claim the full cost of heating and
lighting your business premises for tax relief.
Unfortunately, neither you nor your company can claim tax relief for entertaining clients. There is no tax relief available on the cost of entertaining anyone other than bona fide payroll employees.
When you’re entertaining your employees, this may be allowable for tax relief in your business’s accounts, but it could also be a benefit on which your employees have to pay some tax.
In order for a party to be what HMRC calls a “qualifying event“ and therefore not a taxable benefit for your staff, it must meet all of these three criteria:
- It is an annual event (such as a Christmas party).
- It is open to all staff.
- It costs less than £150 per guest present.
If any of these three conditions aren’t met – for example, if the event is a one-off meal to celebrate a new contract, or if some employees are excluded, or if the cost per head is over £150 – then the whole cost of the event becomes a taxable benefit.
You can only claim the cost of flights in full if the primary purpose of your journey was for business. If it was mixed (i.e. both for business and private), then you can only claim any costs that you can clearly separate from the private part of your journey.
If you can’t separate the journey, you can’t claim any of the costs. For more details, visit our article about travel and accommodation.
Food and drink
At your home or an office
If you don’t have any employees, you can’t claim the cost of food and drink you buy to eat while you’re
working from home or in your usual office. If you have employees, you can provide basic food and drink (such as tea, coffee and biscuits) for them, along with free meals at a canteen, and claim tax relief for these costs – so long as the food and drink you provide is available to all of your staff.
As a self-employed person, you are allowed to claim the cost of very little of the food and drink you buy when you’re out and about on business. HMRC takes the stern line that everyone must eat to live, and only has a few exceptions:
You can only claim tax relief on the cost of your food and drink when you’re making a journey that’s outside your normal working pattern, such as going to visit a client who you usually deal with online. However HMRC doesn’t define “normal working pattern” in any detail, so if you include a claim for the cost of food and drink on this basis, you should be prepared to justify it to a visiting inspector.
If you work from home, you can claim tax relief on a percentage of your gas costs, based on how much you use your home for business.
You can claim the full cost of heating and lighting your business premises for tax relief.
Gifts to employees
As a self-employed employer, if you give a personal gift to one of your employees, for example a birthday or wedding gift, there’s no tax to pay on it and you don’t have to report it to HMRC. This is because HMRC treats it as a gift from you as a person, rather than from an employer.
There is no specific guidance from HMRC about whether you can claim tax relief on gifts to employees by putting them in your accounts as a cost. You should ask an accountant about your individual case.
You can only claim tax relief for the full cost of hotel accommodation if the primary purpose of your stay was for business. If it was mixed (i.e. for both business and private purposes), then you can only claim tax relief for any costs that you can clearly separate from the private part of your stay. If you can’t separate the stay between business and private, you can’t claim tax relief for any of the costs.
You can claim tax relief on the full cost of insurance for business, such as contents insurance for an office or a specialist home business policy. However, you can’t claim tax relief for any insurance that has a dual purpose, such as private medical insurance for the business owner.
You can almost never claim tax relief for the cost of medical treatment, even if it relates to an injury you sustained at work. The exception is for an actor or another performer who has cosmetic surgery that they can prove is purely for business. HMRC’s example is that of an experienced radio performer who has her teeth straightened to allow her to work on TV.
If you’re self-employed and using your own car, the simplest way to claim tax relief for your running costs (including petrol or diesel) is to include your business mileage in your accounts at HMRC’s approved rates. Another option is to work out your car running costs and claim a percentage, which may save you tax if you have a car that’s comparatively expensive to run.
If you work from home and pay a mortgage, you may be able to claim tax relief for a proportion of the interest that you pay, but not the capital repayment.
Parking fines and speeding tickets
Sorry, you can’t claim tax relief on the cost of fines or speeding tickets, even if you incurred these while travelling on business, because you incurred the cost while breaking the law!
Pension contributions to your own pension count as personal costs, so if you pay these from the business account, you can’t claim tax relief on them through your business accounts. Instead, you would claim tax relief on them by putting them into the ‘Tax Reliefs’ section of the main part of your tax return.
You can claim tax relief on the cost of annual subscriptions paid to a professional institute or society, if members of that body give you the right to use a qualification and you use that qualification in your business. For example, a self-employed bookkeeper could claim the cost of their Institute of Bookkeepers subscription. You can also claim tax relief on the cost of subscriptions to trade associations such as your local Chamber of Commerce.
Property repairs (home)
If you work from home and have repaired your property, you may be able to claim tax relief on some costs. If a property repair relates solely to the part of your home that’s used for business, you would include this cost in your accounts in full, subject to the business use of that room. So for example, if a developer has a home with 10 rooms and the ceiling in her office/spare bedroom was repaired at a £200 cost, she would multiply the cost by 90% (because she uses that room for business 90% of the time), and would include £180 in her company accounts. If the repair is to the whole house, for example a repair to the roof, you can include that in the same proportion as you would the rent or council tax – so in the example of the developer’s 10-room house, she would claim 1/10 of the repair cost x 90%. If the repair is solely for a part of the house that’s not used for business – such as replastering a kitchen – then you can’t claim any part of that repair for tax relief.
If you work from home and pay rent to a landlord, you may be able to claim a proportion of the rent for your business.
Office If you rent an office that you use just for business, you can claim tax relief on the full cost of that rent. The exception is a rent deposit, which goes on your balance sheet and isn’t available for tax relief
If you buy stationery to use for the business, such as business cards or compliment slips, you can claim tax relief on the full amount of this cost.
Home If you work from home and don’t have a separate phone line for business, you can claim the full cost of all the business use of your home phone line or personal mobile (using an itemized bill). You can also claim a percentage of the line rental, based on how much you use it for business purposes and how much is for personal use. Remember that if you are claiming the flat-rate allowance for business use of a home, this does not include business calls from your home phone line. Office If you have a separate phone line or mobile for business, you can claim tax relief on all the calls and line rental for this phone.
Tolls and car parking
You can claim tax relief for the full cost of tolls and car parking fees you pay while travelling on business. If you are claiming tax relief using the mileage method (see: Vehicle), you can claim tax relief on the costs of tolls and car parking in addition to the mileage. Remember, however, that you can’t claim tax relief on parking fines! See Parking fines and speeding tickets for more detail.
You can only claim tax relief for the full cost of train tickets if the primary
purpose of your journey was for business.
If it was mixed (i.e. for both business and private use), then you can only
claim tax relief for any costs that you can clearly separate from the private
part of your journey.
If you can’t separate the journey, you can’t claim tax relief
for any of the costs.
HMRC doesn’t give any explicit guidance about what counts as a claimable business journey for sole traders. It only says that if the travel is “regular and predictable”, or between home and a “base of operations” such as a co-working space where you spend most of your working days, then the costs couldn’t be claimed. We suggest speaking to an accountant about your specific circumstances.
Training and personal development
If you’re self-employed, HMRC says that you can only claim tax relief on training costs if the training updates expertise that you already have. For example, a web developer who attends a course to keep up with new developments in the industry can claim tax relief for that cost. Training that gives you new expertise, knowledge or skills, however, isn’t allowable for tax relief.
If you’re self-employed and using your own car, and your sales are under the VAT threshold (£85,000 a year at the time of publishing), the simplest way to claim tax relief for your running costs (including petrol) is to include your business mileage in your accounts at HMRC’s approved rates. You can only use this mileage method if you haven’t claimed capital allowances on that vehicle before. If you drive both a car and a van or lorry for business, then you only get one allowance for all the vehicles that you use. For more details, visit our article about travel and accommodation.
Home If you use a lot of your home water supply for business – for example, if you run a car valeting service – then you would need to apply to the water company for the business use to be separately charged, and you could claim tax relief for the full cost. If your business use of water is only minor, you can’t claim tax relief for any of the business cost.
Office You can claim tax relief on the full cost of water at your business premises
You may be able to claim tax relief for the costs of hosting a website if you think that your website will earn you more money than the cost it takes to host it. HMRC uses the analogy of a website as a “shop window” to clarify when you can claim tax relief for the costs. There are no hard and fast rules here so we would recommend speaking to an accountant about these costs. Hope you Have read our Self-Employed Expense or Sole-Trader Guide and our services.
Why Tax Care Accountants for Self-Employed Expense?
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