Business Rates

Rehan Javed

Are you self-employed in the UK? Getting ready to file your taxes and grumbling about how much you have to pay? Good news! There are several allowable expenses that HMRC lets you deduct before working out your taxable profit, giving you a significantly lower tax bill than if you were filing Self Assessment tax for salaried employees. As always, we recommend talking to an accountant about exactly which expenses on Self Assessment you can claim back. But for now, let us talk about the HMRC Self Assessment allowable expenses you should know about.

Costs you can claim as allowable expenses

1. Office costs

These include:

2. Staff/employee costs

You can claim:

3. Business premises

HMRC Self Assessment allowable expenses under this category include:

4. Vehicle costs

Among the allowable expenses for Self Assessment are:

If you use your own vehicle for business, working out the fraction of costs that go towards business can be hard. What many self-employed people do instead is to claim a mileage allowance – more on this below.

5. Travel costs

Allowable business travel expenses include:

However, you are not allowed to claim any costs incurred while breaking the law, such as fines for speeding or parking tickets.

6. Clothing expenses

You can claim HMRC Self Assessment allowable expenses for:

However, you cannot claim the costs of your everyday business attire.

7. Professional and financial services

Under this category of expenses on Self Assessment you can claim:

8. Marketing costs

HMRC lets you claim the following marketing expenses on Self Assessment:

9. Unpaid invoices

This is one of the most useful HMRC Self Assessment allowable expenses, and one that many self-employed people do not even know about. If you are certain that an invoice you have issued to a customer would not ever be paid, you can claim it as bad debt. However, it is important to note that you cannot do this if you use cash basis accounting. That is because you only record money that you have actually received under a cash basis. Plus, you cannot claim unpaid invoices related to the disposal of land, machinery, or buildings.

What if you are using something for both business and personal purposes?

This especially applies when you are filing your Self Assessment tax return while working from home or using your personal electronic devices for work. The way to do this is by demonstrating clearly what fraction of the bill is accounted for by your business. So if you are working from home, you can work out the fraction of the rent that is accounted for by your home office space by calculating its square footage. You can then claim that fraction under HMRC Self Assessment allowable expenses. HMRC also lets you claim back fractions of your heating and electricity costs in the same fashion. Similarly, you can claim back the portions of your phone or internet bill that you can demonstrate are for business purposes. The same applies to any travel that combines business and personal reasons, as well as the use of your personal vehicle.

Simplified expenses for Self Assessment

Sorting out these bills to claim HMRC Self Assessment allowable expenses can be quite cumbersome. To make things easier, HMRC allows you to claim back simplified expenses. These are flat amounts that you claim on things like working from home, living on your business premises, and vehicular usage. For the 2023/24 tax year, the work-from-home simplified expense amounts to £26 per month for those who work from home for at least 101 hours per month. This adds up to £312 per year that you can put under allowable expenses on Self Assessment. However, while simplified expenses may make things convenient, you might miss out if your actual business costs of working from home are much higher than the flat rate. You can use HMRC’s online expenses calculator to decide whether it is better to opt for simplified expenses or claim back the actual amounts.

How to submit your HMRC Self Assessment allowable expenses

Hopefully this helped you understand the kinds of expenses on Self Assessment you can claim back as a self-employed person. We highly recommend using an accounting software to track your expenses as and when they occur. This avoids the trouble of having to hunt down bills at the end of the year, and the software will help you calculate exactly what you can claim when filing a Self Assessment tax return while working from home. Plus, you can always talk to an accountant or tax advisor like Lyel Accountants. Our competent team can examine the specific ins and outs of your business and make sure you do not pay any more tax than you have to. Contact us to get started.