Allowable expenses for the self-employed
If you are self-employed, claiming all of your allowable business expenses can significantly reduce your tax bill. For example, if your business turnover is £40,000 and you have £10,000 of allowable expenses, you will only pay tax on your taxable profit of £30,000. However, personal spending and money withdrawn from the business for private use cannot be claimed.
A wide range of business costs may qualify as allowable expenses. These include office expenses such as stationery, phone bills and software subscriptions, as well as the costs of running business premises, including rent, utilities, business rates and insurance. Travel expenses, including fuel, parking charges and public transport costs incurred for business journeys, can also be claimed.
Other common deductible costs include staff wages, subcontractor fees, uniforms and protective clothing, advertising and marketing expenses, website costs, professional subscriptions and certain training courses that help maintain or update existing business skills. Businesses that buy goods for resale can also claim the cost of stock and raw materials.
Those who work from home may be able to claim a proportion of household costs, including heating, electricity, internet charges and rent or mortgage interest. Alternatively, many self-employed individuals can use HMRC's simplified expenses system, which uses flat-rate allowances for working from home, use of vehicles and living at business premises.
