If you work on a self-employed basis, there are certain running costs that you are allowed to deduct from your overall turnover before you calculate your taxable profit. These are known as ‘allowable expenses’, and as a self-employed worker, it is important that you are aware of what these are, because if you don’t factor them in when you calculate your annual tax return, you could be missing out on potential savings which could be quite significant.
Allowable expenses do not include anything you take from your business to pay for things you buy for personal use. Limited company rules on expenses are different, and we’ll look at those in a separate post in the future.
What can I claim as allowable expenses?
The following are allowable expenses which can be deducted from your taxable income as a self-employed worker:
Office costs – these include things like rent, rates, security costs, utility bills, insurance costs, telephone and internet, printing and printing supplies, postage, computer software and stationery.
Travelling costs – costs for the likes of fuel, parking and public transport fares are all classes as allowable expenses, as are hotel rooms, vehicle licence fees, repairs and servicing, vehicle insurance, breakdown cover and meals on overnight business trips.
Clothing expenses – if you wear a uniform for work or use protective clothing then you can claim expenses for these. Actors and entertainers can also claim for their costumes.
Staff costs – if you employee staff on any basis, or use subcontractors, then their salaries or fees are classed as allowable expenses. Bonuses, pensions, benefits, agency fees and employer’s National Insurance are also included.
Goods for resale – any goods you purchase to sell on are allowable expenses, as are raw materials and any direct costs incurred from the production of goods.
Financial costs – your costs for professional services such as an accountant, a solicitor, surveyors and architects are all allowable providing they are for business use. You can also claim for professional indemnity insurance cover, bank charges, interest paid on loans and hire purchase and leasing payments.
Advertising and marketing – if you advertise your business via any medium then you can claim those costs as allowable expenses. So for example print advertising, mailings, digital marketing costs, website hosting and free samples. You can also claim for subscriptions to professional or trade journals and trade or professional body membership, providing it is connected to your business. Client or supplier entertainment and event hospitality are not allowable expenses, neither are gym membership fees, payments to political parties or charity donations.
Any fines issued for breaking the law are not allowable expenses.
If you want to make sure you are claiming everything possible, why not take advice from your local bookkeepers? They know precisely what can and cannot be claimed for, and could even help to save you money on your annual tax return.