Expenses if you're self-employed - Fermanagh Enterprise Limited

Introduction

Guide

If you’re self-employed, your business will have various running costs. You can deduct some of these costs to work out your taxable profit as long as they’re allowable expenses.

For example, if your turnover is £40,000, and you claim £10,000 in allowable expenses. You only pay tax on the remaining £30,000 – known as your taxable profit.

Allowable expenses don’t include money taken from your business to pay for private purchases.

If you run your own limited company, you need to follow different rules. You can deduct any business costs from your profits before tax. You must report any item you make personal use of as a company benefit.

Costs you can claim as allowable expenses

These include:

office costs, eg stationery or phone bills
travel costs, eg fuel, parking, train or bus fares
clothing expenses, eg uniforms
staff costs, eg salaries or subcontractor costs
things you buy to sell on, eg stock or raw materials
financial costs, eg insurance or bank charges
costs of your business premises, eg heating, lighting, business rates
advertising or marketing, eg website costs

Contact the Self Assessment helpline if you’re not sure whether a business cost is an allowable expense.

Costs you can claim as capital allowances

If you use traditional accounting, claim capital allowances when you buy something you keep to use in your business, for example:

equipment
machinery
business vehicles, eg cars, vans, lorries

If you use cash basis

If you use cash basis accounting and buy a car for your business, you can claim this as a capital allowance. However, all other items you buy and keep for your business should be claimed as allowable expenses in the normal way.

If you use something for both business and personal reasons

You can only claim allowable expenses for the business costs. For example, your mobile phone bills for the year total £200. Of this, you spend £130 on personal calls and £70 on business. You can claim for £70 of business expenses.

If you work from home

You may be able to claim a proportion of your costs for things like:

heating
electricity
rates
mortgage interest or rent
internet and telephone use

You’ll need to find a reasonable method of dividing your costs, eg by the number of rooms you use for business or the amount of time you spend working from home.

Simplified expenses

You can avoid using complex calculations to work out your business expenses by using simplified expenses. Simplified expenses are flat rates that can be used for: