January: the time of year when we’re frequently asked what expenses can be claimed for if you’re self-employed.
Self-employed workers are among the 11.5 million Brits who need to send a self-assessment return by the end of this month – or face a fine.
Whether you’re a long-time sole trader or making your first forays into the world of self-employment, managing your business’ finances can seem daunting.
However, it doesn’t need to be – and understanding what expenses you can claim for if you’re self-employed makes the tax return process a lot easier (plus saves you money).
To keep things simple, the insolvency experts at Hudson Weir picked out a few key expenses that can be claimed for if you’re self-employed:
Phone bills and broadband costs
Any business calls you make can be claimed for – however, make sure to keep organised.
Unless you have a separate phone, and contract, for business, you’ll need to work out your personal use percentage and deduct that from your mobile bills before claiming.
Regarding the internet, a proportion of the cost can also be claimed for based on business use. This proportion, however, will largely be impacted by your working environment.
So what are the possible working locations for those who are self-employed?
Your business premises
Numerous small business owners choose to work from home – although by doing so this means they cannot claim tax relief on rent bills for both private and business use.
But if you own your home you can claim the interest portion of your mortgage repayments on a pro-rata basis. And even if you don’t own your property, you can still claim a proportion of utility bill costs and council tax.
The more expensive alternative for those who are self-employed involves renting office space.
If you’re renting office space, you can claim expenses for:
- business rates
- utility bills
Don’t forget to also claim for any office supplies you may require (stationary, printer ink, essential software) – so safe filing of receipts should be a high priority.
Wherever your business is based, there won’t be a shortage of potential expense claims.
Travel expenses versus commuting
Regardless of whether you drive a car or a van, you can include business-related travel costs, including vehicle insurance, fuel, hire charges, repairs, servicing and breakdown cover in your expense claim.
You can also claim for business travel by any mode of transport, accommodation and sustenance expenses from overnight business trips.
Do note, however, that while travel for meetings or site visits is claimable, you can’t claim for the cost of commuting or travelling to your own business premises.
As with earlier claim categories mentioned above – if personal and business travel is mixed – you must be able to separate out the business costs in order to include them in your claims.
Clothing, uniforms and workwear
Any specialist items used for work are claimable – provided they are used exclusively for work.
For example, a freelance builder can expense the cost of steel toe-capped boots and protective wear.
However, a self-employed PR agent wouldn’t be able to claim for a business suit – in this case, the versatility of a suit means it isn’t specialist enough to be considered an exclusive business expense.
Keep track of your expenses
Whenever making business transactions, keep receipts and any other form of proof of purchases. These don’t need including with your tax return, but you may need to present them to the HMRC should they request more information.
Remember – you’ll be taxed on your profits – so it’s in your best interest to keep a record of your business expenses. The better the record you keep, the more money you’ll save!