When you’re self-employed, it can be confusing knowing what you are allowed to put through as business expenses as the rules vary depending on your trade.
The main rule of thumb to follow is to work out if that expense is “wholly, necessarily and exclusively” for your business.
If it is, then it is an allowable business expense.
So, what happens if you pay for something personally but partially use it for your business?
A good example of this is your mobile phone bill. Very few people want the hassle of 2 mobile phones so they just use their personal one for business as well. This means that a proportion of your phone usage is business related and your business should bear this cost. This will be allowed for tax purposes. If your business usage varies each month, then simply adjust the proportion each month.
Can I claim mileage?
This is one of the areas that is dependent on your trade. HMRC say that you can’t claim home to work mileage, so if you have a contract in one place for 6 months or more, then that place becomes your place of work and you can’t claim the mileage. However, if you travel to different places, even if it’s the same place for 1 or 2 days per week, to see clients or do work, then you can claim mileage.
I work from home – can I claim anything?
Yes, you can. There are two ways you can calculate your allowable expenses:
- Use the HMRC’s simplified expenses. This gives a flat rate based on the hours you work from home each month. For example, if you work 25-50 hours then you can claim £10 per month. This flat rate does not include telephone or internet expenses.
- You can work out the actual costs. This involves working out how much time you spent working at home and putting through that proportion against your bills for broadband, lighting and heating etc.
What else can I claim?
Other costs you can claim as allowable expenses include:
- Office costs i.e. stationery or phone bills
- Clothing – if it’s safety wear or includes your business logo.
- Advertising and marketing
- Financial costs, such as insurance or bank charges.
Bear in mind that these rules apply to sole traders and business partnerships that have no companies as partners. If you trade as a Limited Company, the rules are somewhat different.
A list of the simplified business expenses for self-employed taxpayers can be found at https://www.gov.uk/simpler-income-tax-simplified-expenses
If you are in any doubt as to whether you can put through something as an expense, or need answers to specific questions, please get in touch for more information.