Self Assessment Expenses you can Claim
When you embark on becoming self employed you may need to register for Self Assessment. This goes for sole traders, company directors, shareholders and LLP partners. The Self Assessment is sent off to HMRC on an annual basis; and based on reported earnings, individuals may need to pay Income Tax and National Insurance Contributions.
The amount of tax owed will vary depending on how much profit was made in the previous tax year. The government does allow you to offset some of your Self Assessment tax bill by claiming a range of business expenses on your Income Tax Return.
This post will highlight some of the expenses which can be written off.
1. Office Supplies
HMRC allows for the claiming of expenses that are based around office supplies, including:
- Your desk phone
- Your mobile phone
- Postage costs
- Business stationery
- Printer ink and cartridges
- Software that your business uses for fewer than 2 years
- Software that you have to make regular payments in order to renew the licence.
Items such as your personal laptop and home computer can also be claimed, but only insofar as it's used for the business. This can mean that if you have purchased a computer that is used 50% of the time for the business, then you can only claim it as a business expense on a pro-rata basis. It's best to seek professional advice on something like this from your accountant.
For larger items, you may need to claim the expense as a capital allowance. To find our more about this, check out the Gov.uk website.
2. Mileage Costs
If you're traveling as a part of your business activities then you can claim a mileage allowance as a part of your Self Assessment.
If you're driving a car or van, then you can claim 45 pence off your tax bill for every mile travelled (up to 10,000 miles); this is known as "simplified expenses". After that, the amount is reduced on 25 pence. For example, if you travelled 11,000 miles in the last year, you're able to claim £4,500 in expenses for the first 10,000 miles and £250 for the remaining 1,000 miles - giving you a total claim of £4,750.
Motorcycles are awarded slightly less, at a flat rate of 24 pence per mile when using simplified expenses.
The alternative way is to charge the expenses directly to the business, which is likely to be of a greater benefit if the vehicle is business owned or used more for business than personal use. These costs can include:
- Vehicle insurance
- Repairs and servicing
- Breakdown cover
Don't forget other costs associated with travel too:
- Train, bus and taxi fares
- Parking charges
- Hotel rooms
- Meals on overnight business trips
Remember, you can only claim for business expenses - this does not include travelling between your home and regular place of work. If the vehicle is split between personal and business use, you may only be able to claim a portion of the cost if you claim for the expense rather than per mile.
Gov.UK offers a handy simplified expenses checker which can help determine which one will be best for you. Give it a go on their website.
3. Legal and financial costs
When you're looking at your business expenses, you should also include and professional costs such as hiring an accountant, surveyor, or any other professional. Likewise, there are other expenses that you claim, such as:
- Professional indemnity insurance premiums
- Bank, overdraft and credit card charges
- Hire purchase interest
- Leasing payments
Be aware: If you're using cash accounting, you can only claim up to £500 in interest and bank charges.
Also, you are not allowed to claim any legal costs associated with buying property or machinery. However, if you're using traditional accounting, you can claim for them as capital allowances.
You are not allowed to claim for any legal or financial costs that are incurred as a result of you breaking the law.
4. Unpaid invoices
If you are using traditional accounting, HMRC allows you to claim for any amount of money you're claiming in your turnover that you don't believe you'll receive. In other words "bad debt", in order to claim any bad debt, you must be sure that the invoices will never be paid in the future.
You are not allowed to claim any unpaid debts that:
- Aren't included in your turnover
- Are related to the disposal of fixed assets
- Such as, land, buildings or machinery
- Aren't properly calculated
Important: bad debt cannot be claimed if you're using cash accounting. This is because cash accounting only records income that you've already received. In some cases, a 6 month rule applies, so it may be worth seeking professional advice before claiming for it.
5. Staff costs
If you have any employees, you can use a wide range of the expenses associated with their employment when filing your Self Assessment. These expenses include:
- Agency fees
- Employer's National Insurance
There are some expenses that you are not permitted to claim, such as the use of a nanny or childminder.
This post has looked at 5 things that you can claim on your Self Assessment, however, there are many more items that can be added to this list so it's worthwhile doing your own research into this. It can be tedious and time consuming but can save you money in the long run.
In some cases, an accountant will be in the best position to offer you advice for your circumstances.
All advice given is for information purposes only and should not be taken as legal advice. Professional advice should be sought before carrying out any actions based on the information given in this post.