If you are self-employed it is important to be aware if an expense is allowable for tax deduction purposes or not. Any allowable costs can be used to reduce your taxable profit.
As a general rule you can claim for items that you would normally use for less than 2 years as allowable expenses, for example, stationery and other office sundries as well as rent, rates, power and insurance costs.
HMRC lists the following expenses as being allowable:
- office costs, for example stationery or phone bills
- travel costs, for example fuel, parking, train or bus fares
- clothing expenses, for example uniforms
- staff costs, for example salaries or subcontractor costs
- things you buy to sell on, for example stock or raw materials
- financial costs, for example insurance or bank charges
- costs of your business premises, for example rent, heating, lighting, business rates
- advertising or marketing, for example website costs
- training courses related to your business, for example refresher courses
You can also claim the applicable part of rent, rates, power and insurance costs for any part of your home used as an office.
Equipment you buy to use in your business that you would expect to last for more than 2 years e.g. computers are treated as allowable expenses if you use cash basis accounting or you can claim Capital Allowances if you use traditional accounting. You cannot claim for any non-business use of premises, vehicles, phones or other office equipment.
The above list does not cover all the costs you may be able to claim. If you are new to self-employment, we can help you draw up a list of allowable costs for your business.