As a self-employed individual, there are many business expenses that you may not realise you can claim to reduce your taxes. Some well-known business expenses you can claim include home office expenses and travel expenses. In this blog, we will highlight lesser-known expenses such as legal costs and marketing costs, so that you can track them throughout the year. This can help minimise your tax bills at year-end, leaving you with more money in your pocket.
Self-employed allowable expenses list
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Tax allowance for uniforms & tools
If you need to buy uniforms, tools or equipment solely for business use you can include these as a business expense. The tools and equipment should not be used privately and the uniform must identify you as having a certain occupation such as a beautician or electrician. Many industries have agreed on tool allowance amounts with HMRC e.g. a mechanic can claim a tool allowance of £120 per tax year without needing to keep receipts – so it’s best to check what your allowance is first.
Popular trades likely to claim back on their tools include electricians, joiners, chefs, hairdressers and mechanics.
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Financial and legal costs
Do not forget to include financial and legal costs on your self-assessment form as many services are eligible for tax deductions such as fees for business accountants, business solicitors, surveyors and architects. Financial costs include hire purchase interest, interest on bank and business loans, overdrafts, monthly bank account charges, credit card charges and professional indemnity for insurance premiums.
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Unpaid invoices and bad debt
Write off bad debts and unpaid invoices by demonstrating that you have taken reasonable steps to recover the amount, such as sending reminders or engaging a collection agency. The debt must be specific and not a general provision for possible bad debts. Only the portion of the debt that is genuinely uncollectible can be claimed.
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Tax relief on charitable donations
Donations made to registered charities can qualify for tax relief. For UK taxpayers, donations made under Gift Aid allow the charity to claim an extra 25p for every £1 donated, and higher-rate taxpayers can claim back the difference between the basic rate and the higher rate of tax. Businesses can deduct charitable donations from their taxable profits as long as they are not directly benefiting from the donation.
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Tax on business phone lines
Costs associated with phone lines used exclusively for business purposes. If it is a mixed-use line, only the business portion of the expense can be claimed. Keep detailed records of all phone usage and allocate costs appropriately between business and personal use. You can also provide each member of staff with one company mobile phone.
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Plant and machinery
Expenses for purchasing and maintaining equipment and machinery used for business operations. Includes items like computers, vehicles, tools, and heavy machinery. Annual investment allowance allows immediate deduction of the cost of plant and machinery up to a certain limit. For costs exceeding the AIA limit or not covered by AIA, a percentage of the remaining costs can be deducted annually.
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Employee training payments
Training must be work-related and intended to improve employees’ skills in their current role. Claimable costs include course fees, materials, and any related travel expenses.
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Marketing costs
Expenses related to promoting and advertising the business to attract and retain customers include costs for online and offline advertising, promotional events, marketing materials, and any associated agency fees. Ensure the costs are directly related to the business and keep detailed receipts and invoices.
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Tax relief on subscriptions
Costs for subscriptions to professional journals, trade magazines, and membership fees for professional associations. Subscriptions must be relevant to the business and contribute to its operation or the professional development of the business owner or employees. Maintain records of subscriptions and justify their relevance to the business in case of an audit.
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The annual staff Christmas Party
The annual staff Christmas Party (or summer barbeque) is tax deductible provided it is open to all employees and costs £150 or less per person.
How to properly document your business expenses
To properly document your business expenses you need to keep detailed records of all your transactions through receipts, cashbooks, bank statements and invoices for each expense. Our top tips include categorising your expenses to make it easier to track them and using accounting software or apps to help you keep track.
As part of MTD, we advise all of our customers to use technology to their advantage. Safely storing your expenses online will make sure that you don’t miss out on any potential deductions and helps to keep you tax compliant.
If you need a professional opinion on your self-assessment or compliance don’t hesitate to contact 360, Chartered Accountants.
