If you’re self employed then there are lots of expenses you will incur in running and managing your business. And, you can claim many of these as tax expenses when you submit your tax return every year.
Our guide looks at what expenses you can and cannot claim if you’re self employed.
Common tax expenses you can claim
There are lots of tax expenses you can claim if you’re self employed. These include:
• Salaries and benefits that you pay your employees
• Employee training costs
• Employers’ National Insurance contributions
• Rent or interest payments on your dedicated business premises
• Related premises costs such as cleaning, heating, lighting, water
• Business rates
• Insurance and pension benefits for employees
• Employee redundancy payments
If you work from home you can also claim a proportion of the costs you incur such as insurance, mortgage interest, council tax, water rates, gas and electricity and cleaning. The proportion of costs you claim is normally based on the number of rooms in your home that you use for business purposes.
You can also claim the running costs of a vehicle that you use for your business. This may include petrol, car tax, insurance, repairs and servicing. If the vehicle is used for both business and personal use then you can normally only claim a proportion of these expenses.
Petrol expenses can normally be claimed for travel between different places of work (such as deliveries to clients).
Common tax expenses you cannot claim
While there are lots of expenses linked to your business that you can claim, there are many that you cannot. Common tax expenses that you cannot claim include:
• Your own salary – if you are self-employed you cannot claim your own wages, salary
or any other money drawn from your business
• Costs of building work – you cannot claim the initial costs of buildings or improvements to your property (for example you could not claim the cost of an extension to your home in order to provide an office from which to run your business). However, such work may qualify for annual investment allowances or capital allowances
• You cannot claim your own National Insurance contributions and neither can you claim the income tax you have to pay, the costs of your pension or the costs of your life insurance
If you work from home, you cannot claim the proportion of your household bills that relate to the private use of your property.
In terms of travel expenses you cannot claim the petrol for a journey between your home and your normal place of work. You also can’t claim the cost of buying a vehicle (although this may qualify for capital allowances).
You also cannot claim any meals except for breakfast or an evening meal on an overnight business trip.
There is a simple rule for determining whether an expense can be claimed.
If you can divide an expense between business and personal cost (using your home as an office, for example) then the business proportion is deductible.
If the nature of the expense means it cannot be divided (such as the cost of an overseas flight), then no deduction is allowed.