Allowable Business Expenses for the Self Employed

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Self employed allowable expenses
Allowable business expenses are really important if you’re self employed because they reduce the amount of tax you pay.

What are Allowable Business Expenses

Generally speaking, business expenses are only tax allowable if they are ‘wholly, necessarily and exclusively’ incurred in the performance of your business.
So if you are a Self Employed Marketing Consultant and pay for Hootsuite to manage your clients Twitter, then the monthly cost of this subscription will be an allowable business expense.  Or say you are a Self Employed Web Developer and travel to a client meeting then the cost of travel will be an allowable expense.

How Allowable Business Expenses Reduce Your Tax Bill

When you are self employed the amount of tax and national insurance you pay is based on your business profits.  That is all you income less all your costs.
Therefore it is in your best interests to always make sure you claim all your allowable expenses by:

Allowable business expenses for self employed

Examples of Allowable Business Expenses

Here are some common allowable business 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

Business Expenses You Use Personally

It’s common that someone who is self employed you may buy something for business use but also use it personally, for example a laptop.  In these cases HMRC allows a claim for the portion of the item being used for the business.

Say you use your laptop 60% of the time for business and the rest for personal things like internet shopping or facebook. You would be able to claim for 60% of the cost of the laptop as an allowable business expense against your taxes.

How to Claim Allowable Business Expenses

You claim for your allowable business expenses as part of your self assessment tax return form.  You will need to claim within the Self Employment Sections (Boxes 17 – 31) and categorise your expenses in line with the HMRC requirements.
Allowable business expenses
All expenses must be supported by a receipt that you need to keep hold of for 6 years.  So set up a way of filing your receipts online, which backups up, to make your life easier.
Incorrect claims for business expenses can can result in penalties. If you are unsure, always seek the help of a professional.