The basic rule
Your taxable profit is your income minus your allowable expenses, so every legitimate cost you claim reduces your tax. The cost must be for the business. Where an item is part personal and part business, you can normally claim only the business share.
What you can claim
GOV.UK lists these categories of allowable expense:
- Office costs, such as stationery and phone bills
- Travel costs, such as fuel, parking, train and bus fares
- Clothing, such as uniforms and work-specific clothing
- Staff costs, including salaries and subcontractor payments
- Stock and raw materials bought for resale
- Insurance and bank charges
- Premises costs, such as heating, lighting and business rates
- Website costs and marketing
- Work-related training courses
What you cannot claim
GOV.UK is clear that allowable expenses do not include money taken from your business for personal use. Personal portions of mixed-use items, such as private phone calls, cannot be claimed. Keep receipts and records, because HMRC can ask to see them.
Simplified expenses
Instead of working out actual costs, you can use flat rates for three areas: vehicles, working from home and living on business premises. It can save record-keeping, though it is worth comparing against your real costs.
Expenses or the trading allowance?
You must choose. If you use the £1,000 trading allowance you cannot also claim expenses. If your real expenses are more than £1,000 you will usually be better off claiming them instead.
Need a hand with your return?
We prepare and file Self Assessment returns for directors, sole traders and landlords, and tell you exactly what is due and when before anything is submitted. Call 0114 327 1480.