Understand which types of costs are disallowable expenses, the rules set out by HMRC as to what can and can’t be expensed in a business. Plus, I’ll explain how to handle them when filling in self-assessment tax returns (SA100 form) and include examples of disallowable expenses to help you further.
Table of contents
This advice in this guide is for This guide is individuals registered as self-employed. Different rules apply if you have a Limited Company and pay corporation tax.
1. What are HMRC Disallowable Expenses?
Disallowable expenses are things that you pay for but cannot be claimed as a tax deduction. This is even though you may feel they were paid for as part of running your business.
2. Examples of Disallowable Expenses
Here are some common HMRC disallowable expenses:
2.1 Travel from Home to Your Office
If you have chosen to rent an office or space from which to base yourself from then any travel between your home to your office is not an allowable business expense. Read this separate guide to find out more about claiming business travel when you’re self-employed.
2.2 Client Entertainment
It may be entirely work-related but client entertainment is a disallowable expense. There are circumstances where you can buy a gift for your clients and can claim this as an allowable expense. However, if you take them out for a meal, even if it is to win a new contract or secure a business relationship, these costs cannot be claimed as an expense against your taxes.
2.3 Fine and Penalties
Any fines and penalties that you pay are disallowable. That includes things like:
- Self Assessment Penalties
- Parking Fines
- VAT Penalties
There are certain circumstances where someone who is self-employed can claim clothing on their tax return. This is because clothing is an allowable expense if it is:
- a uniform;
- protective clothing that you need for your work;
- costumes because you are an actor or entertainer.
Any other types of clothing will most likely be considered a disallowable expense. This would include everyday clothing or business suits. Read this separate guide to find out more about claiming for clothing when you’re self-employed.
Everyday lunches cannot be claimed as an expense against your self-employment taxes. But, if you are out and about, away from your normal place of work, then you may be able to claim for your lunches. Read this separate guide to find out more about claiming for food if you’re self-employed.
2.6 Training for New Skills
Whilst you can expense any training you do to improve your skills and keep you on top of your game. Training costs for learning new skills are a disallowable cost. However, you may be able to claim these when you set up your new business.
For those that are registered as sole traders, any salary paid to themselves is a disallowable expense. That means any tax is calculated on business turnover minus allowable business expenses (excluding any money drawn as salary).
3. Handling Disallowable Expenses on Self-Assessment Tax Returns
Disallowable expenses cannot be claimed against self-employment taxes and incorrect claims can result in HMRC penalties. Disallowable expenses can simply be excluded when filling in a tax return, whether total expenses are being entered as a single figure in the short-form self-employment section or as a breakdown.