What Expenses Can I Claim as Self Employed?

As a self-employed individual in the UK, understanding what business expenses you can claim is essential for managing your tax bill effectively. Claiming allowable expenses can reduce your taxable profit, meaning you’ll pay less tax. HM Revenue and Customs (HMRC) permits a wide range of expenses, but they must be wholly and exclusively for business purposes.

What are Allowable Expenses?

Allowable expenses are costs incurred during the day-to-day running of your business. These expenses can be deducted from your revenue to calculate your taxable profit, meaning you pay tax only on your net profit.

HMRC’s golden rule is that the expenses must be wholly and exclusively for business use. If something is used for both business and personal reasons, you can only claim the business proportion.

Categories of Expenses You Can Claim

1. Office Costs

If you run your business from home or rent office space, you can claim costs related to maintaining your workspace. This includes:

• Office rent or co-working space fees

• Business rates (if applicable)

• Utilities, such as heating, electricity, and water, for your office space

• Stationery and office supplies, including paper, pens, and postage

• Computer equipment, including laptops, desktops, printers, and software that is used for business

For home-based businesses, you can claim a portion of your household bills such as heating, electricity, Council Tax, water rates, and mortgage interest or rent. This is calculated by determining how much of your home is used for business and how often.

2. Travel Expenses

You can claim business-related travel expenses such as:

• Fuel and vehicle costs for business journeys (excluding the commute to and from your regular workplace)

• Train, bus, plane, and taxi fares for business trips

• Hotel and accommodation costs for business travel

• Meals incurred while travelling for business

If you use your own vehicle for business purposes, you can claim either:

• Actual vehicle running costs (fuel, servicing, insurance, repairs, etc.), or

• Mileage Allowance Relief, which allows you to claim a set rate per mile. The rates for the 2023/24 tax year are:

  • 45p per mile for the first 10,000 miles

  • 25p per mile thereafter

Be aware that you cannot claim travel expenses if the journey is personal, such as commuting between your home and regular place of work.

3. Business Premises Costs

If you rent or own a business premises, certain expenses can be claimed, including:

• Rent

• Business rates

• Utility bills

• Property repairs and maintenance

• Security costs

Note: If you work from home, you can claim a proportion of your household bills instead of the full rent or mortgage costs.

4. Marketing and Advertising

You can deduct the cost of promoting your business, such as:

• Advertising costs (online ads, print ads, billboards)

• Website development and hosting

• Marketing materials, including business cards, brochures, and flyers

• Sponsorships or events related to promoting your business

5. Professional Fees and Subscriptions

If you need professional advice or belong to industry organisations, you can claim:

• Accountant or tax advisor fees related to your business

• Legal fees, provided they’re directly related to your business

• Professional subscriptions or membership fees if they relate to your business and are necessary to your trade (as long as HMRC approves them)

6. Insurance

Many types of business insurance premiums can be claimed as allowable expenses, including:

• Public liability insurance

• Professional indemnity insurance

• Employer’s liability insurance

• Contents insurance for business assets

7. Employee Costs

If you employ staff or use subcontractors, you can claim:

• Salaries and wages

• Bonuses and commission

• Pensions contributions

• Employer’s National Insurance Contributions (NICs)

• Subcontractor fees (if using self-employed workers)

You can also claim for benefits provided to your employees, such as health insurance, but this will be subject to different rules and may result in the need to complete a P11D form for employee benefits.

8. Stock and Materials

For businesses that sell goods or use materials to create products, you can claim:

• Raw materials used in production

• Stock, including items bought for resale

• Shipping and delivery costs related to business purchases

9. Repairs and Maintenance

You can claim expenses for maintaining and repairing equipment or business property, as long as it doesn’t improve the item beyond its original condition. This includes:

• Repairing machinery or equipment

• Servicing business vehicles

• Property repairs (but not improvements or alterations)

10. Bank and Financial Charges

Expenses associated with banking and financial management of your business can also be claimed, including:

• Bank charges for business accounts

• Interest on business loans or overdrafts

• Payment processing fees (e.g., PayPal, Stripe, or card payment fees)

11. Training and Courses

You can claim the cost of training courses related to your current business activities. This might include:

• Skills development courses to improve your business offering

• Training related to new software or tools used for your business

You cannot claim training that helps you acquire new skills outside of your existing business activities.

How to Calculate and Record Your Expenses

1. Keep Detailed Records: Whether you’re claiming the actual cost of an expense or a percentage, you’ll need to keep receipts, invoices, and any other evidence of payment.

2. Separate Business and Personal Use: If something is used for both business and personal purposes, only claim the business portion. For example, if you use a phone for both business and personal calls, you should calculate the percentage of time used for business and claim only that amount.

3. Use a Digital Record System: HMRC's Making Tax Digital (MTD) initiative encourages the use of digital software for record-keeping. Use accounting software to track your expenses and income to stay compliant.

Tips for Maximising Your Expense Claims

• Track mileage accurately: Use apps or logs to track your business mileage, ensuring that you don’t miss out on valuable claims.

• Use simplified expenses: For some costs, such as working from home, HMRC allows the use of flat-rate deductions (e.g., £26 per month for home office use). Check if these work better for your business.

• Hire an accountant: A professional accountant can ensure that you’re claiming all allowable expenses correctly and help you reduce your taxable profit.

• Keep everything up-to-date: Regularly update your records, so you don't forget to claim any expenses by the time you file your tax return.

Conclusion

Claiming allowable expenses as a self-employed individual in the UK is crucial for reducing your tax bill and improving your cash flow. By keeping track of your costs and maintaining accurate records, you can ensure you are not paying more tax than necessary. From office expenses to travel, marketing, and employee costs, understanding what you can claim will make your Self Assessment tax return easier to manage and more tax-efficient.

Always consult an accountant or tax advisor if you’re unsure about what you can claim, and remember to keep detailed records to support your claims in the event of an HMRC audit.