Self-employed / freelancer – 17 things you can claim for in your self-assessment
Generally speaking, you can deduct from your turnover all costs which are wholly and exclusively for the purpose of carrying out your business.
Expenses you may be eligible to claim are:
1. Travel and accommodation
You can claim travel, accommodation and parking costs on business trips. You can also claim reasonably priced breakfast and evening meals on overnight business trips.
Also, you can add running costs of a business vehicle. This includes petrol, road tax, MOT, insurance, repairs and servicing. Additionally, the cost of buying a vehicle might qualify for capital allowances. Note, if you also use the car or van privately, you can claim only the proportion of vehicle’s expenses.
The easiest way to do this is to fill a business mileage book for each travel. Mileage is calculated at 45p per mile for cars and vans for the first 10,000 miles, and at 25p per mile above 10,000 miles. You can claim mileage for motorcycles at 24p per mile and for bicycles at 20p per mile. However, mileage can only be claimed for business miles, such as travel from usual workplace to supplier or from one client to another. Travel from home to the same office every day is viewed as normal commuting and is not allowable for tax purposes. In addition to a mileage book, it is advisable to keep fuel and other car receipts and bills.
2. Working from home
If you work from your home, you can claim proportion of certain household expenses, such as utility bills, cleaning, insurance, mortgage interest, council tax, and general maintenance. The proportion should be calculated based on the floor area or number of rooms used for business, and the amount of time they are used for business purpose.
Note, you cannot claim the initial cost of buildings and improvements (such as extensions to house) unless you are using this part of your house exclusively for business. Although such work may qualify for annual investment allowance or capital allowances, this can cause you problems with capital gains tax when you will sell your house in the future.
Alternatively, in order to avoid complicated apportionment you can claim a Use of Home flat rate based on hours you work every month. You can claim £10 per month if you work between 25 and 50 hours monthly. £18 per month if you work from home for 51-100 hours and £26 for 101 hours and more every month. You can find more information here.
3. Dedicated business premises expenses
If you rent or owe business premises, such as an office space, workshop or garage, the following can be claimed:
- Rent costs
- Gas bills
- Electricity costs
- Cleaning services
- Water rates
- Business rates
- General maintenance costs.
4. Mobile and Landline telephone
If you do not have dedicated business phone line, you can claim for business use only. The best approach is to periodically track your business and your personal calls so you can see what proportion of the telephone use is for business purposes. Keep a record of detailed telephone bills to support your tax return.
Similarly, you can claim a proportion of your broadband costs as your business expenses. Support the proportion used by keeping a log to show how many hours broadband was used for business and personal purposes. You can keep the log for a couple of weeks every few months assuming that those weeks represents the average use.
6. Computer, printer and any other office equipment
If your computer or any other office equipment are only used by the business, you can offset the whole cost against the profits. However, if the family uses it half the time, you can claim 50% of the cost.
7. Materials and purchases
You can claim for all materials and supplies used in production of goods or for services which you provide.
You can only claim clothing expenses if you need specialist items that are entirely used for work. For example, a self-employed solicitor cannot claim for a new suit arguing that he can wear it only for his work, because it can also be used for other occasions, such as going to the pub after work. However, a construction worker can offset the full cost of steel toe-capped boots and a protective jacket. Also, T-shirts branded with business logo are allowable as business costs.
You can add your business advertising and marketing costs to your self-assessment. However, in the contrary to what lots of people think, business entertainment is not allowable as business expense for the tax purposes. HMRC is very strict on entertainment costs. Anything you can discuss in the restaurant, can be discussed in an office; therefore, it is not a reasonable deduction.
10. Business insurance
If you need insurance for your business, such as public liability insurance, professional indemnity insurance, equipment insurance, etc. then they can be offset against your business profits.
11. Bank, credit card and other financial charges
You can claim business costs for bank, overdraft and credit card charges, interest on bank and business loans, and arrangement fees for setting up business finance.
12. Accountancy and other legal and professional costs
If you pay an accountant for your end of year accounts or you pay a lawyer to draft your terms and conditions, all of these fees are allowable for tax purposes.
13. Magazine subscriptions
If you have a subscription to a trade paper or magazine, which is relevant to your business (e.g. Garden news if you provide gardening services) then the cost is tax deductible.
14. Website costs
Ongoing website hosting costs for your business site are tax deductible. Meanwhile, website development costs are viewed as a capital expenditure and are treated differently, therefore ask for advice from your accountant.
15. Ongoing training costs
If you need to keep your skills and knowledge up to date then you can claim costs for training against your profits. Note, if you are being taught something new which will enable you to improve your products or services and increase your profits, then this is viewed as capital, and you should seek consultation from your accountant.
16. Charitable donations.
If you are a higher-rate taxpayer and have made charitable donations, you can claim back the higher rate tax you have paid. For example, if you donated £1,000 to Children in Need and you are a 40% taxpayer, you can claim £250 against the tax bill.
17. Salaries and benefits
If you employ staff, the following can be claimed:
- Employees’ wages and redundancy payments
- Employer’s National Insurance
- Insurance and pension benefits for employees
- Any employee childcare provision you make, and
- The cost of training employees.
Note. If you are self-employed, you cannot claim your own wages, salary or other money drawn from the business. Also, you cannot claim your own National Insurance contributions, income tax, your own pension costs and life insurance.
Calculating your business expenses for your tax return
When you complete your tax return, you will get the option to give a single figure for your allowable expenses or to give a detailed breakdown. If you choose to enter the single figure, you still need to work out all business expenses accurately and keep a record of your workings and receipts for 6 years in case you will be subject to HMRC tax investigation.
Self-assessment can be complicated and you can face fines if you make a mistake on your tax return. Therefore, look at the guidelines on the government’s website and seek professional advice if you need it.