Claiming business expenses is a key part of completing your self assessment tax return for HMRC.
For individuals who are self-employed, operating a business incurs numerous expenses.
To calculate your taxable profit, you have the option to subtract certain costs, provided they qualify as allowable expenses
In this article we explain what business expenses are, what counts as a business expense, and what you can claim.
What are business expenses?
Without understanding the differences between business and personal expenses, you run the risk of not paying the right amount of tax as misunderstanding usually leads to over deduction and underpayment of tax.
Anthony Andrews, Content Marketing Manager at Intuit QuickBooks, provides you with a few pointers to make sure you don’t get stung by a hefty tax bill on January 31st.
What counts as a business expenses?
A very important point about completing the Self-Assessment is working out what constitutes as an actual expense attached to your work and what doesn’t.
Put quite simply, a business expense is any cost that is exclusively attributed to work purposes.
What expenses can you claim?
Most business expenses are allowable, as long as they follow a simple rule: the expense must be wholly and exclusively for business purposes.
Typical examples include:
- Travel expenses (though generally, travel between home and work is not allowable)
- Rent for business purposes
- Bank charges
- Delivery charges
- Equipment costs (You can claim as allowable expenses if you use cash basis accounting and claim as capital allowances if you use traditional accounting)
- Stock
- Utility costs for business premises
- Telephone fees
- Stationery & postage
HMRC has also accepted some seemingly outrageous tax return claims.
If you are not sure whether a business cost is an allowable expense you can contact Self Assessment: general enquiries.
Otherwise, you should know that the following are included in items that cannot generally be claimed:
- Parking/speeding violations
- Tuition
- Childcare services
- Gym memberships
- Client entertainment
It’s a good idea to keep records of businesses expenses and HMRC have a webpage that explains what business records you should keep if you’re self-employed.
Thinking of starting a business? Check out our free online courses in partnership with the Open University on being an entrepreneur.
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Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.
