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Understanding allowable expenses when you are self employed is the main way you will reduce your tax bill.
When you are self employed generally speaking all business expenses are tax allowable if they are ‘wholly, necessarily and exclusively’ incurred in the performance of your business.
Here’s an example: if you are a Self Employed Web Designer and pay for hosting to host your clients websites, then the cost of this subscription will be an allowable expense.  Or say, you are a Self Employed Bookkeeper and have to travel to a meeting with a client at their offices, then the cost of travel will be an allowable expense.

Common Allowable Expenses when you are Self Employed

Here is a list of common expenses that are tax allowable when you are self employed:

  • cost of goods bought for re-sale or cost of raw material used;
  • salaries, wages and bonuses paid to people you employ or who freelance for you;
  • business travel expenses;
  • if you choose to rent business premises, then all rent/lease payments, business and water rates, light, heat, power and property insurance;
  • If you choose to work from home you may be able to claim an amount for use of home as office;
  • 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.

This list of allowable expenses is by no means exhaustive. If you are unsure whether an expense is tax allowable, then it is advisable to keep hold of the receipt to discuss it with an accountant when tax return time comes.


If you use something for both business and personal reasons

It is a common scenario for someone who is self employed to buy something for business use but also use it personally, for example a laptop.

In these types of cases HMRC allows a claim for the portion of the item being used for the business. So if for example you use your laptop 60% of the time for business use and the other 40% for personal things like internet shopping, facebook etc then you would be able to claim for 60% of the cost of the laptop as an allowable expense against your taxes.

Don’t Forget – Keep Your Receipts

All allowable expenses you claim must be supported by a receipt. So make sure you keep hold of all your paper or emailed receipts for tax time.

It is also really important to be aware of which expenses are allowable for your business because incorrect claims can result in penalties.

Useful Reading: Self Employed Tax Tip – 4 Disallowable Expenses