Most people will know that certain costs can be expensed against your sole-trading revenue or income to reduce taxable profits and ultimately reduce your tax liability and help you save tax. Here is a helpful guide to allowable business expenses that HMRC will normally allow.
The Inspector of Taxes (HMRC) will allow revenue expenditure as a deduction from your Sole trading/ freelance income when it is incurred wholly and exclusively for the purposes of your profession.
Generally Allowable Business Expenses
1. Accountants Fees including bookkeeping fees.
2. Advertising, publicity, brochures, photographs, business cards and flyers.
3. Agents commission – eg. If you pay someone commission to secure business
4. Bad debts (included in turnover).
5. Bank charges for your business bank account
6. Books – business related
7. Bulbs, fuses, locks, keys, plugs, leads and minor repairs.
8. Casual labour (check whether to be paid through PAYE).
9. Client entertaining – you can’t claim for the costs of entertaining clients, suppliers or customers. You can’t claim for event hospitality
10. Computer consumables including CDs, DVD, USB memory sticks, external hard drives, (backup) and software annual licence fee.
11. Courier & postage charges.
12. Data protection registration and renewal fees
13. Fines – you cannot claim for Fines as result of breaking the law eg. Speeding fines
14. Gifts to charity/ local good causes and gifts to customers costing up to £50 and bearing the business name.
15. Heat and light – calculate business use on area and duration occupied.
16. Hire and lease – for machinery used in the business
17. Home Office costs – calculate business percentage on floor area or rooms used:-
o Rent and rates, or Mortgage interest (if owned)
o Repairs and maintenance
18. Hotel accommodation where it is necessary to stay overnight for business
19. Insurance including office and business property policies.
20. Interest on business loans or business bank account
21. Journals and catalogues.
22. Legal costs including debt recovery and to set up Contracts.
23. Miscellaneous expenses – give a full description of each item and state why you are claiming it – these must be Wholly, Necessary and Exclusively for business
24. Motoring expenses (include motor cycle and/ or car), keep a log of the total and business mileage for each vehicle so that the business element can be calculated:-
o Breakdown subscription/ insurance – if a car, then only the business proportion
o Car repairs, servicing, MOT – if a car, then only the business proportion
o Motor insurance – if a car, then only the business proportion
o Parking at engagements, tolls and ferries.
o Petrol – you can either estimate the private use proportion of fuel claimed OR claim mileage. You cannot claim both.
o Road fund licence – estimate the business proportion
25. Newspapers and journals (if specific to your work).
26. Photocopying and printing.
28. Purchases of stock/ materials. – you cannot claim for any goods or materials for private use
29. Recording equipment.
o Batteries for radio/ cassette recorder/ calculator.
o Memory cards.
30. Removal expenses.
31. Research assistance and material.
32. Rent and rates of premises – calculate business percentage on floor area basis.
34. Secretarial assistance including payments to spouse/ partner at the market rate for the work provided
36. Software for your computer, web domain registration and hosting fees.
37. Tools – hand and electric (not kept for more than 2 years – if kept for more than 2 years then claim capital allowances).
38. Staff welfare including first aid and beverages at Christmas party.
39. Stationery and printing including inkjet cartridges and toner.
40. Subscriptions to professional bodies. You can’t claim for gym membership fees, political party fees/ contributions or charity donations
41. Subsistence – you are allowed to claim the cost of all your meals when on overseas engagements. Only claim the cost of the evening meal when staying overnight on business in the UK and daytime meals incurred on business travel.
o Landline – business proportion.
o Internet connection – business proportion.
o Mobile – business proportion.
44. Training for engagements in hand.
45. Travel – where this relates to business travel incurred wholly and exclusively for business:-
o Bicycle repairs and maintenance, consumables and insurance – calculate the business use on a mileage basis.
o Train, bus, flight costs
o Travel cancellation fees.
o Travel insurance.
o You can’t claim for travel between your home and your usual place of work
46. Wages and salaries paid to employees – to be paid through PAYE. You cannot claim for domestic carers eg. Nannies
47. Warranties. e.g. PCs.
o Hire of protective clothing/ uniform.
o Laundering and dry cleaning of protective clothing/ uniform.
o Cost of protective clothing/ uniform.
o You can’t claim for everyday clothing (even if you wear it just for work)