“ALLOWABLE BUSINESS” EXPENSES, WHEN COMPLETING YOUR SELF ASSESSMENT

The Self-Assessment deadline is just a few weeks away and you need to know what expenses are allowable so that you can deduct them from your turnover to calculate out your taxable profit.

HMRC have guidelines and rules about what an “allowable” expense is as you cannot deduct all your self-employed expenses.  The latter must relate strictly to your business so you can calculate your profit accurately and thereby pay the correct tax.  You should retain any receipts or other proof of purchase in case you are subject to a tax investigation.

What are “allowable” expenses?

Office expenses – Business stationery, printing costs (including printer ink) and postage.  Business equipment e.g. computer, printers and computer software may be allowable if using cash basis accounting.

Business premises – rent, maintenance & repair, utility bills, property maintenance and security are an expense but buying or building your business premises is not.  If you run your business from home, you need to calculate the proportion of the bills that are related to your business.  If you work at least 25 hours a month you can use simplified expenses which is based on a flat monthly rate which the government calculate.

Travel – business related car or van costs, including insurance, fuel, hire charges, repairs, servicing and breakdown cover are included.  You can use a flat monthly rate given by the government to make things easier through simplified vehicle expenses.  Business travel by train, bus, plane or taxi and hotel rooms and meals for an overnight stay are allowable expenses.  You cannot claim for commuting from home to your business premises. If a journey is for both personal & business reasons you must separate out the business costs. You cannot claim for entertaining clients, suppliers and customers or event hospitality.

Stock and materials – Cost of stocks, raw materials and any direct costs that come from producing the goods.

Legal and Financial costs – if you have an accountant, solicitor or other professional for business reasons you can include the cost in your calculations. Bank, overdraft and credit card charges, interest on any bank and business loans, hire purchase interest and leasing payments can also be included. If you use cash basis accounting, then the maximum you can claim is £500 in interest and bank charges.

Business insurance – The cost of business insurance e.g. public liability insurance and professional indemnity insurance.

Marketing – newspaper advertising, directory listings, mailshots, free samples and website costs

Clothing – cost of uniform, protective clothing etc but not everyday clothing for work.

Staff costs – employee and staff salaries, bonuses, pension contributions, benefits, agency fees and employer National Insurance contributions.

Subscriptions – cost of membership to trade bodies or professional membership organisations if relevant to your business.  Subscriptions to trade or professional journals.

There is further information on the Simply Business website if you require more detail and links to HMRC.

If you need help then call us now on 0113 2864486.

Source: Simply Business