Check out our Useful guide published in the Hampton and Stanground Gazettes here

Business Expenses for the Freelance or Self Employed

If you’re self-employed or work on a freelance basis, your business will have various running costs. You can deduct some of these costs to reduce your taxable profit as long as they’re allowable expenses. The lower your taxable profit the lower your tax bill at the end of the tax year; however, any errors could attract penalties and interest charges so it’s important to get it right.


The following list details some of the more common expenses which are allowable by HMRC:


  • Mobile Phone Costs


In addition to the usual office costs like stationery, postage, internet and line rental, which are all allowable expenses, you can claim some of your mobile phone costs as a business expense, the tricky bit is what proportion to claim as usually you will use your phone for both personal and business use.

What you should in theory do is go through one or two bills each year and work out your business use vs personal use – that will be the basis of what % of your total bill to claim as a business expense.

A more pragmatic approach that we suggest is that if you use your mobile phone heavily for business and just a bit personally then to claim perhaps 80% of the total costs for business would be fair and justifiable. However if you use it quite evenly for business and personally, then we would suggest claiming perhaps 50%.

What you need to remember is that you might have to justify this percentage to HMRC in the event of an enquiry, so keep a note of your workings and lean on the side of caution when it comes to what % to claim.

  1. Home Office costs

With so many businesses operating from home, it’s important to ensure you have a sufficient home office cost put against your tax return. There are two ways to do this:


A simplified HMRC rate of £4/ week, which the HMRC will allow you to put through without any back up, or to apportion the actual home running costs – include costs such as mortgage interest (but not capital repayments), rental charge, Gas, Electricity, Insurance, Service Charges, Cleaning and Council tax and then work out a fair business %.


The simplest way of doing this is to firstly work out how many rooms you have in your house, then work out what % of the time you use one of the rooms for business use. Let’s say you use one of your rooms as an office half the time and the other half it’s a guest bedroom and say you have 5 rooms excluding bathrooms, hallways and kitchens. Say the total running costs of your house are £10,000p.a. then it would therefore be justifiable to charge £1,000 per year (50% x 1/5 x £10,000) to the business as rent.

Another tip is that you shouldn’t use your office room entirely for business use – keep at least a small element of the room for personal use as this protects you from any potential capital gains tax issues when you come to sell.

  1. Travel and Vehicle Costs

All business travel between your ‘Usual place of work’ (which can be your home if you operate from home) and your business destination is allowable. Again you have two ways to do this – the simple flat rate of £0.45/ mile for cars up to 10,000 miles and then £0.25/mile after 10,000 miles (you must keep a record of the business journeys you are claiming for) or to record the actual running costs of a car or other vehicle including fuel, road tax, insurance, repairs and servicing adjusted for the business proportion of total miles the vehicle is used for. You can choose whichever method gives you the best tax saving.


Non-Allowable Expenses

Money taken from your business to pay for private purchases is not an allowable expense and neither is entertaining (client or staff) even if you spend the entire time talking about work!


If there are any elements that you would like further clarification, speak to Polly for a free initial chat.