Allowable Business Expenses for the Self Employed
It can be confusing knowing which types of expenses are allowable, but if you are self employed it is really important to understand which are allowable as it can reduce the amount of tax you have to pay.
Generally speaking, business expenses are only tax allowable if they are ‘wholly, necessarily and exclusively’ incurred in the performance of your business.  So if you are a Self Employed Marketing Consultant and pay for Hootsuite to manage your clients Twitter, then the monthly cost of this subscription will be an allowable expense.  Or say you are a Self Employed Web Developer and have to travel to a meeting with a client, then the cost of travel will also be an allowable expense.
You will find some common allowable business expenses below:
  • cost of goods bought for re-sale or cost of raw material used
  • salaries, wages, bonuses and pensions
  • car and van insurance, repairs, servicing, fuel, parking for business use vehicles
  • rent for business premises, business and water rates, light, heat, power and property insurance
  • marketing; advertising, email campaigns, website costs
  • phone and internet costs
  • trade or professional journals and subscriptions
  • accountants, solicitor’s and other professional fees
  • bank, overdraft and credit card charges
It is a common scenario that someone who is self employed you may buy something for business use but also use it personally, for example a laptop.  In these types of cases HMRC allows a claim for the portion of the item being used for the business. So if for example you use your laptop 60% of the time for business use and the other 40% for personal things like internet shopping, facebook etc then you would be able to claim for 60% of the cost of the laptop is an allowable expense against your taxes.
All expenses must be supported by a receipt, so make sure you keep hold of all your paper or emailed receipts. It is also really important to be aware of which expenses are allowable for your business because incorrect claims can result in penalties. If you are unsure, always seek the help of a professional.
Anita is a Chartered Accountant, turned blogger and creator of the ever popular free Go Self Employed Email Mini Course, which has been completed by hundreds of attendees all over the UK. Using her 10 years experience in accounting, tax and operations for Small Businesses, Anita is on a mission to make finance simple for the self employed, so they can stop stressing about tax & finances and focus on building profitable businesses which will give them the lifestyle they dream of.