If you’re self-employed, your business will have various running costs. You can deduct some of these costs to work out your taxable profit if they’re allowable expenses.
Costs you can claim as allowable expenses
Here is a general list of allowable expenses –
- 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 heating, lighting, business rates
- advertising or marketing, for example website costs
- training courses related to your business, for example refresher courses
If you use something for both business and personal reasons you can only claim allowable expenses for the business costs.
Your mobile phone bills for the year total £200. Of this, you spend £130 on personal calls and £70 on business. You can claim for £70 of business expenses.
You can claim items you’d normally use for less than 2 years.
For example – phone, mobile, fax and internet bills, postage, stationery, printing, printer ink and cartridges, computer software your business uses for less than 2 years or computer software if your business makes regular payments to renew the licence (even if you use it for more than 2 years)
For equipment you keep using in your business, for example computers or printers, then it depends on the following –
- allowable expenses if you use cash basis accounting
- capital allowances if you use traditional accounting
If you rent premises for your office
You can claim expenses for rent for business premises, business and water rates, utility bills, property insurance and security.
If you work from home
You can claim a proportion of your costs for heating, electricity, council tax, mortgage interest or rent and internet and telephone use
You’ll need to find a reasonable method of dividing your costs, for example by the number of rooms you use for business or the amount of time you spend working from home.
You have 4 rooms in your home, one of which you use only as an office.
Your electricity bill for the year is £400. Assuming all the rooms in your home use equal amounts of electricity, you can claim £100 as allowable expenses (£400 divided by 4).
If you worked only one day a week from home, you could claim £14.29 as allowable expenses (£100 divided by 7).
You can claim allowable business expenses for vehicle insurance, repairs and servicing, fuel, parking, hire charges, vehicle licence fees, breakdown cover, train, bus, air and taxi fares, hotel rooms and meals on overnight business trips.
If you buy a vehicle for your business, you can claim this as a capital allowance.
You can claim for uniforms, protective clothing needed for your work and costumes for actors or entertainers. You cannot claim for everyday clothing (even if you wear it for work).
Legal and financial costs
Accountancy, legal and other professional fees can count as allowable business expenses.
You can claim business costs for bank overdraft and credit card charges, interest on bank and business loans, hire purchase interest and leasing payments. If you’re using cash basis accounting, you can only claim up to £500 in interest and bank charges.
You can claim for any insurance policy for your business, for example public liability insurance.
Marketing, entertainment, and subscriptions
You can claim allowable business expenses for advertising in newspapers or directories, bulk mail advertising (mailshots), free samples and website costs. You cannot claim for entertaining clients, suppliers and customers and event hospitality.
You can claim for subscriptions of trade or professional journals, trade body or professional organisation membership if related to your business
You can claim allowable business expenses for training that helps you improve the skills and knowledge you use in your business (for example, refresher courses).
You cannot claim for training courses that help you start a new business or expand into new areas of business, including anything related to your current business.