If you’re self-employed, your business will have various running costs. You can deduct some of these costs to work out your taxable profit as long as they’re allowable expenses. For example, if your turnover is £40,000 and you claim £10,000 in allowable expenses, you’ll only pay tax on the remaining £30,000 - known as your taxable profit. This guide is also available in Welsh (Cymraeg) . Allowable expenses do not include money taken from your business to pay for private purchases. If you run your own limited company , you need to follow different rules. You can deduct any business costs from your profits before tax. You must report any item you make personal use of as a company benefit . Costs you can claim as allowable expenses These include: office costs , for example stationery or phone bills travel costs , for example fuel, parking, train or bus fares clothing expenses , for example uniforms staff costs , for example salaries or subcontractor costs things you buy to sell on , for example stock or raw materials financial costs , for example insurance or bank charges costs of your business premises , for example heating, lighting, business rates advertising or marketing , for example website costs training courses related to your business, for example refresher courses You cannot claim expenses if you use your £1,000 tax-free ‘trading allowance’ . Contact the Self Assessment helpline if you’re not sure whether a business cost is an allowable expense. Costs you can claim as capital allowances If you use traditional accounting , claim capital allowances when you buy something you keep to use in your business, for example: equipment machinery business vehicles, for example cars , vans, lorries You cannot claim capital allowances if you use your £1,000 tax-free ‘trading allowance’ . If you use cash basis If you use cash basis accounting and buy a car for your business, you can claim this as a capital allowance. However, all other items you buy and keep for your business should be claimed as allowable expenses in the normal way. If you use something for both business and personal reasons You can only claim allowable expenses for the business costs. Example Your mobile phone bills for the year total £200. Of this, you spend £130 on personal calls and £70 on business. You can claim for £70 of business expenses. If you work from home You may be able to claim a proportion of your costs for things like: heating electricity Council Tax mortgage interest or rent internet and telephone use You’ll need to find a reasonable method of dividing your costs, for example by the number of rooms you use for business or the amount of time you spend working from home. Example You have 4 rooms in your home, one of which you use only as an office. Your electricity bill for the year is £400. Assuming all the rooms in your home use equal amounts of electricity, you can claim £100 as allowable expenses (£400 divided by 4). If you worked only one day a week from home, you could claim £14.29 as allowable expenses (£100 divided by 7). Simplified expenses You can avoid using complex calculations to work out your business expenses by using simplified expenses . Simplified expenses are flat rates that can be used for: vehicles working from home living on your business premises

Office, property and equipment

Claim items you’d normally use for less than 2 years as allowable expenses, for example: stationery rent, rates, power and insurance costs For equipment you keep to use in your business, for example computers or printers, claim: allowable expenses if you use cash basis accounting capital allowances if you use traditional accounting You cannot claim for any non-business use of premises, phones or other office resources. Stationery You can claim expenses for: phone, mobile, fax and internet bills postage stationery printing printer ink and cartridges computer software your business uses for less than 2 years computer software if your business makes regular payments to renew the licence (even if you use it for more than 2 years) Claim other software for your business as capital allowances , unless you use cash basis . Rents, rates, power and insurance costs You can claim expenses for: rent for business premises business and water rates utility bills property insurance security using your home as an office ( only the part that’s used for business ) Business premises You cannot claim expenses or allowances for buying building premises. Claim expenses for repairs and maintenance of business premises and equipment. For alterations to install or replace equipment, claim: allowable expenses if you use cash basis accounting capital allowances if you use traditional accounting You can also claim capital allowances for some integral parts of a building, for example water heating systems.

Car, van and travel expenses

You can claim allowable business expenses for: vehicle insurance repairs and servicing fuel parking hire charges vehicle licence fees breakdown cover train, bus, air and taxi fares hotel rooms meals on overnight business trips You cannot claim for: non-business driving or travel costs fines travel between home and work You may be able to calculate your car, van or motorcycle expenses using a flat rate (known as simplified expenses) for mileage instead of the actual costs of buying and running your vehicle. Buying vehicles If you use traditional accounting and buy a vehicle for your business, you can claim this as a capital allowance . If you use cash basis accounting and buy a car for your business, claim this as a capital allowance as long as you’re not using simplified expenses . For all other types of vehicle, claim them as allowable expenses.

You can claim allowable business expenses for: uniforms protective clothing needed for your work costumes for actors or entertainers You cannot claim for everyday clothing (even if you wear it for work).

You can claim allowable business expenses for: employee and staff salaries bonuses pensions benefits agency fees subcontractors employer’s National Insurance training courses related to your business You cannot claim for carers or domestic help, for example nannies.

You can claim allowable business expenses for: goods for resale (stock) raw materials direct costs from producing goods You cannot claim for: any goods or materials bought for private use depreciation of equipment

Legal and financial costs

Accountancy, legal and other professional fees can count as allowable business expenses . You can claim costs for: hiring of accountants, solicitors, surveyors and architects for business reasons professional indemnity insurance premiums You cannot claim for: legal costs of buying property and machinery - if you use traditional accounting, claim for these costs as capital allowances fines for breaking the law Bank, credit card and other financial charges You can claim business costs for: bank, overdraft and credit card charges interest on bank and business loans hire purchase interest leasing payments alternative finance payments, for example Islamic finance If you’re using cash basis accounting you can only claim up to £500 in interest and bank charges. You cannot claim for repayments of loans, overdrafts or finance arrangements. Insurance policies You can claim for any insurance policy for your business, for example public liability insurance. When your customer does not pay you If you’re using traditional accounting , you can claim for amounts of money you include in your turnover but will not ever receive (‘bad debts’). However, you can only write off these debts if you’re sure they will not be recovered from your customer in the future. You cannot claim for: debts not included in turnover debts related to the disposal of fixed assets, for example land, buildings, machinery bad debts that are not properly calculated, for example you can not just estimate that your debts are equal to 5% of your turnover Bad debts cannot be claimed if you use cash basis accounting because you’ve not received the money from your debtors. With cash basis, you only record income on your return that you’ve actually received.

Marketing, entertainment and subscriptions

You can claim allowable business expenses for: advertising in newspapers or directories bulk mail advertising (mailshots) free samples website costs You cannot claim for: entertaining clients, suppliers and customers event hospitality Subscriptions You can claim for: trade or professional journals trade body or professional organisation membership if related to your business You cannot claim for: payments to political parties gym membership fees donations to charity - but you may be able to claim for sponsorship payments

You can claim allowable business expenses for training that helps you: improve skills and knowledge you currently use for your business keep up-to-date with technology used in your industry develop new skills and knowledge related to changes in your industry develop new skills and knowledge to support your business - this includes administrative skills You cannot claim for training courses that help you: start a new business expand into new areas of business that are not directly related to what you currently do If you are still unsure what training you can claim for, read about more examples of what you can and cannot claim for .

Keep records of all your business expenses as proof of your costs. Add up all your allowable expenses for the tax year and put the total amount on your Self Assessment tax return . You do not need to send in proof of expenses when you submit your tax return. But you should keep proof and records so you can show them to HM Revenue and Customs ( HMRC ) if asked. You must make sure your records are accurate.

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Expenses if you're self-employed

Overview

If you’re self-employed, your business will have various running costs. You can deduct some of these costs to work out your taxable profit as long as they’re allowable expenses.

For example, if your turnover is £40,000 and you claim £10,000 in allowable expenses, you’ll only pay tax on the remaining £30,000 - known as your taxable profit.

This guide is also available in Welsh (Cymraeg).

Allowable expenses do not include money taken from your business to pay for private purchases.

If you run your own limited company, you need to follow different rules. You can deduct any business costs from your profits before tax. You must report any item you make personal use of as a company benefit.

Costs you can claim as allowable expenses

These include:

office costs, for example stationery or phone bills
travel costs, for example fuel, parking, train or bus fares
clothing expenses, for example uniforms
staff costs, for example salaries or subcontractor costs
things you buy to sell on, for example stock or raw materials
financial costs, for example insurance or bank charges
costs of your business premises, for example heating, lighting, business rates
advertising or marketing, for example website costs
training courses related to your business, for example refresher courses

You cannot claim expenses if you use your £1,000 tax-free ‘trading allowance’.

Contact the Self Assessment helpline if you’re not sure whether a business cost is an allowable expense.

Costs you can claim as capital allowances

If you use traditional accounting, claim capital allowances when you buy something you keep to use in your business, for example:

equipment
machinery
business vehicles, for example cars, vans, lorries

You cannot claim capital allowances if you use your £1,000 tax-free ‘trading allowance’.

If you use cash basis

If you use cash basis accounting and buy a car for your business, you can claim this as a capital allowance. However, all other items you buy and keep for your business should be claimed as allowable expenses in the normal way.

If you use something for both business and personal reasons

You can only claim allowable expenses for the business costs.

Example

Your mobile phone bills for the year total £200. Of this, you spend £130 on personal calls and £70 on business.

You can claim for £70 of business expenses.

If you work from home

You may be able to claim a proportion of your costs for things like:

heating
electricity
Council Tax
mortgage interest or rent
internet and telephone use

You’ll need to find a reasonable method of dividing your costs, for example by the number of rooms you use for business or the amount of time you spend working from home.

Example

You have 4 rooms in your home, one of which you use only as an office.

Your electricity bill for the year is £400. Assuming all the rooms in your home use equal amounts of electricity, you can claim £100 as allowable expenses (£400 divided by 4).

If you worked only one day a week from home, you could claim £14.29 as allowable expenses (£100 divided by 7).

Simplified expenses

You can avoid using complex calculations to work out your business expenses by using simplified expenses. Simplified expenses are flat rates that can be used for:

vehicles
working from home
living on your business premises

View a printable version of the whole guide

Expenses if you're self-employed

Overview

Costs you can claim as allowable expenses

Costs you can claim as capital allowances

If you use cash basis

If you use something for both business and personal reasons

If you work from home

Simplified expenses

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Expenses if you're self-employed

Overview

Costs you can claim as allowable expenses

Costs you can claim as capital allowances

If you use cash basis

If you use something for both business and personal reasons

If you work from home

Simplified expenses

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