Self Employed Expenses – what can I claim?

by Simon Adams | Oct 11, 2018 | Archive

“Can I claim for the printer I just purchased?”

“How do I reclaim for petrol – do I keep my receipts?!”

“I took a client out for lunch – is it tax deductible?”

These are just some of the self employed expenses related questions that we’re asked on almost a weekly basis. So it’s safe to say that there is a LOT of confusion around what you can (and can’t) claim against your tax bill. But is it any wonder, when the official advice from Gov.uk contains baffling nuggets like this…

If you use traditional accounting, claim capital allowances when you buy something you keep to use in your business. You can not claim capital allowances if you use your ‘trading allowance’

If you use cash basis accounting and buy a car for your business, you can claim this as a capital allowance – all other items you buy and keep for your business should be claimed as allowable expenses.

Helpful? We think not. Let’s strip it back, ban jargon and go for the simple approach…

Introducing: Simplified and ‘other’ expenses

There are two groups of expenses you need to understand – simplified expenses (which includes motoring expenses and bills for working from home) and other expenses (which covers everything else – such as your mobile, travel and training).

Simplified expenses

Simplified expenses do what they say on the tin – they offer an easier way to work out how much you can claim on your self-assessment.

Motoring

Working out exactly how much it costs to run and use your car, van or motorbike for business would be super complicated if you had to do the math for things like depreciation, the business proportion of your petrol spend, insurance and so on (and on!).

Instead, the government allow self-employed business owners to simply claim by the mile (so you’ll need to keep a record of all of your business miles).

Within your records, you should note: where you travelled to, how many miles you travelled and what the reason for travel was – such as a client meeting.

NOTE: This DOES NOT apply for limited companies.

ANNUAL MILEAGE	RATE PER MILE
CARS & VANS – UP TO 10,000 MILES	45p
CARS & VANS – OVER 10,000 MILES	25p
MOTORBIKES	24p

EXAMPLE: You drove 15,000 business miles in a year using your car. So you can claim…

10,000 x 45p = £4,750

5,000 x 25p = £1,250

£4,750 + £1,250 = £6,000

The alternative to simplified expenses for your motoring would require calculating the exact business portion of your:

vehicle insurance
repairs and servicing
fuel
vehicle licence fees
breakdown cover

Working from home

Instead of adding up all of your allowable expenses in relation to your home (such as your council tax, electricity, gas etc.), those who work from home for more than 25 hours a month may find it easier to opt for simplified expenses.

HOURS OF BUSINESS USE EACH MONTH	FLAT RATE PER MONTH
25 TO 50	£10
51 TO 100	£18
101 OR MORE	£26

EXAMPLE: You work 30 hours a month for 6 months, and 120 hours a month for 6 months. So you could then claim:

£10 x 6 = £60

£26 x 6 = £156

£60 + £156 = £216

Key question: Should you use simplified expenses?

While simplified expenses are, unsurprisingly, simpler than the traditional method of claiming expenses (and could save you time), they may leave you out of pocket. Which method is right for you comes down to the amount you may lose by going with simplified expenses, and whether this loss would be balanced out by the time you gain.

Other Expenses

Mobile Phone

The cost of running your mobile phone is tax deductible (both the contract, and the calls, data and other add-ons). However it is ONLY the business proportion that you can claim. You specify how much this is – for example 50% business use, 50% personal use. It needn’t be exact (such as 33.657% business / 66.343% personal), but you should be ready to justify the percentages if asked by HMRC.

A good place to start is with your past three months bills. Using two highlighters, work your way through it to split personal from business use, and then add each up to see how the bill breaks down.

Subsistence

If you travel for business purposes, you can claim for ‘reasonable’ subsistence costs (e.g. food and drink). Pay attention to the reasonable part however (that rules out Michelin Star restaurants and champagne for breakfast!).

Travel & business mileage

Allowable expenses for travel and business mileage can include:

Motor expenses – either a mileage allowance or proportion of your costs for business travel (see our explainer in the simplified expenses section)
parking
train fares
bus fares
congestion charges

Key question: Can I claim for parking tickets/fines?

The simple answer is no and maybe…

No – if they’re issued by the council (as you will have broken the law – and fines are not allowable expenses).

Maybe – if they’re issued by a private organisation.

All in all, just be careful where you park, and how long you park up for!

Accountancy fees

Accountancy fees are simple in relation to what is and isn’t allowable (at least officially). Sole trader or partnership accounts you CAN claim for; accounts for personal taxes you CANNOT.

However, if an accountant prepares both at the same time, it’s generally argued that the total cost is allowable, as the cost for preparing your personal return would be negligible as compared to that of your business accounts.

Entertaining

Here’s the one almost everyone thinks is allowable (and it’s absolutely not). Wining, dining and playing golf with your clients is not allowable (in fact, no ‘entertaining’ costs are deductible at all).

But this only applies to clients and third-parties – so if you want to book a team away weekend – do it (it’s tax deductible!)

REMEMBER: Figures related to client entertaining still need to show in your accounts, as it is indeed a cost to the business (just not one that you can get tax relief on!).

Clothing and uniform

Uniform costs ARE allowable, as is safety clothing that you need to carry out your work.

However you can’t claim for your everyday wardrobe (so PJs for office days at home don’t count!).

Training

Let’s finish with a simple one…

Keeping your skills up-to-date or need training to meet the requirements of a professional body? Allowable.

Learning NEW skills? Not allowable YET – the HMRC are in consultation for a review of this rule, and a statement is expected in the Autumn Budget 2018.