Generally speaking, business expenses are tax allowable if they are ‘wholly, necessarily and exclusively’ incurred in the performance of your business. So if you are a Self Employed Web Designer and pay for hosting to host clients websites, then the cost of this subscription will be an allowable expense. Or say you are a Self Employed Consultant and have to travel to a meeting with a client at their offices, then the cost of travel will also be an allowable expense.
Here is a list of common Self Employed Allowable Expenses:
- 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 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 for tax time. 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.