When filling out your Self Assessment tax return, a self employed person can add up their business expenses and deduct these from their turnover—in effect reducing the amount of tax owed. But what business expenses are allowed? The HMRC has strict definitions of what counts as an "allowable expense".
We've reviewed the government guidelines around self employed expenses and summarised the information below. Use this to help you understand what expenses you can claim if you're self employed, and what's not allowed. If you are unsure whether or not a specific business cost is actually an allowable expense, contact the Self Assessment Helpline via phone (0300 200 3310) or webchat
What is an "Allowable Expense"?
By definition, allowable expenses are business costs that you can deduct from your profits before tax. By deducting business costs, you reduce your pre-tax profit and consequently the taxes you owe.
Example: Allowable Expenses
You earn £45,000 working as self employed this year and you claim £10,000 in allowable expenses. The remaining £35,000 is your taxable profit—this is the amount you pay taxes on, not the £45,000 in turnover.
|Self Employed Allowable Expenses Example|
Which Self-Employed Expenses Can I Claim?
Here are explanations of some of the expenses that usually count as "allowable expenses" for tax purposes if you're self employed.
General Office Expenses
General office expenses from monthly communications bills to postage, stationary and printer ink are all tax deductible if you're self employed.
- Communications: landline, mobile, fax and internet bills
- Postage: marketing mailings, shipping costs, etc.
- Stationery: printer paper, pens, etc.
- Printing: including printer ink and cartridges
- Computer software: if used for less than 2 years or for which you make regular payments to renew the licence
- Computer and printers: allowable expenses for cash basis accounting (but capital allowances for traditional accounting)
You may be able to claim other software that is used on a longer-term basis as capital allowances IF you use traditional accounting (not cash basis).
If you're self employed you can claim your rent, repairs & maintenance of your business premises and equipment, utility bills, water bills, property insurance and security costs.
- Business premises rent
- Property repairs and maintenance
- Property insurance
- Business rates
- Water rates
- Utility bills
However, you cannot claim expenses for buying a property for your business or for alterations or improvements (although these might qualify for annual investment allowance or capital allowances).
What if you work from home?
If you work from home, you can claim some of your costs as allowable expenses, such as:
- Utilities (e.g., gas and electric)
- Council Tax
- Mortgage interest or rent
- Internet and telephone use
However, you can't claim the entirety of these costs. Instead, you'll need to figure out how much of these expenses went towards your business—based on both the proportion of your home used for business and the time spent working at home.
Example: Claiming Self Employed Expenses When Working From Home
If you have 5 equally-sized rooms in your home (e.g., kitchen, reception room and three bedrooms, one of which you've converted to an office) and you work from home 5 days a week then you could theoretically claim 14% of your utilities, council tax, mortgage interest or rent and internet or phone bills as allowable expenses. That is, 20% of your home is used for business (1 out of 5 rooms), but only on 5 out of 7 days—20% times 5 days divided by 7 days = 14%).
Please be aware that if you work from home, you need to alert your home insurance company—and depending on the work you do (e.g., do clients visit you at home?) your cost of home insurance might increase.
Travel & Car Expenses
When working as self employed, you can deduct some of your car expenses—a proportionate amount to the amount of driving you do for your business.
- Vehicle insurance
- Breakdown cover
- Vehicle repairs and servicing
- Fuel & parking
- Hire costs
- Licence fees
- Public transport fares (e.g., train, bus, air and taxi)
- Hotel rooms
- Meals (overnight business trips only)
However, you cannot claim for non-business related travel costs/driving, fines or commuting from home and work and back again.
Using Simplified Expenses
If you use simplified expenses when you're self employed (which you can do if you work at least 25 hours a month from home), you can calculate your vehicle expenses using a flat rate by mileage—this saves you from having to track and calculated individual costs for insurance, repairs, fuel, etc. The flat rate for claiming vehicle expenses if you're self employed ranges from 24p to 45p per mile:
|Claiming Simplified Vehicle Expenses When Self Employed|
|Cars and goods vehicles (first 10,000 miles driven for business in a year)||45p/mile|
|Cars and goods vehicles (after 10,000 miles)||25p/mile|
Example: Simplified Car Expenses
Let's say you've driven your car 12,000 miles for business in the year. You can claim 45p per mile for the first 10,000 miles and 25p per mile for the next 2,000 miles, claiming £5,000 of car-related expenses:
|Simplified Business Expenses Car Example (12,000 miles total business driving)|
|10,000 miles x 45p||£4,500|
|2,000 miles x 25p||£500|
|Total claimed for car mileage||£5,000|
Buying a car for your business can be treated as a capital allowance, as long as you're not using simplified expenses for cash basis accounting.
Regular clothes (e.g., business suits) are not allowable business expenses, even if you only use them for work. You can claim for:
- Costumes (if you're an actor or entertainer)
- Protective clothing (if needed for work)
While you can't claim your own wages/salary, National Insurance contributions, income tax, pension costs or life insurance, you can claim costs related to your staff and employees:
- Salaries of employees and staff
- Subcontractor pay
- Agency fees
- Employer’s National Insurance
- Training courses (so long as related to your business)
If you buy raw materials or stock (that is, goods for resale), you can claim these items, as well as the direct costs involved in producing goods. However you can't claim for depreciation of equipment used in producing goods or goods bought for private use.
Financial and Legal Costs
You can claim expenses related to hiring professionals to help with financial and legal matters related to your business, such as:
In addition, you can claim for financial business costs such as:
- Bank, overdraft and credit card charges
- Loan interest
- Hire purchase interest
- Lease payments
- Islamic finance
However, if you're using cash basis accounting the maximum amount you can claim in bank and interest charges is £500 a year.
Self employed business insurances like public liability, professional indemnity and employers' liability are tax deductible; however personal insurances that are benefits such as personal accident insurance are not counted as allowable business expenses.
Many expenses related to advertising your company and products are allowable expenses (however, you can't claim for event hospitality or entertaining clients, suppliers or customers):
- Advertising (e.g., newspapers or directories)
- Mailshots/bulk mailings
- Giving out free samples
- Costs related to a website
You can also claim for materials meant to keep you in the know regarding your profession, or to improve skills and knowledge used for your current business (but not a new business or new areas of your business), such as:
- Professional journals
- Trade journals
- Professional or trade organisation membership fees
- Training courses
If you're self employed and use simplified expenses, you can claim car expenses using a flat rate of between 25p and 45p per mile for your business miles. Click here to see an example. If you don't use simplified expenses, you can deduct a proportionate amount of your car insurance, breakdown cover, car repairs, servicing, fuel, parking and loan or finance interest/hire costs based on the percentage of your total annual miles that are driven for your business (as opposed to personal use).
No, you typically cannot claim for lunch if you're self employed—the only meals you can claim for if you're self employed are meals on overnight business trips.
To claim business expenses if you're self employed, keep good records of your expenses (you don't need to send them in unless the HMRC asks for them, however) and include the total amount of your allowable expenses on your Self Assessment tax return.
Summary of What You Can Claim if Self Employed
|Summary of Self Employed Allowable Expenses|
|General Office Expenses|
|Landline, mobile, fax and internet bills|
|Computer and printers|
|Business premises rent|
|Property repairs and maintenance|
|If you work from home, a proportionate amount of:|
|Utilities (e.g., gas and electric)|
|Mortgage interest or rent|
|Internet and telephone use|
|Travel & Car Expenses|
|Vehicle repairs and servicing|
|Fuel & parking|
|Public transport fares (e.g., train, bus, air and taxi)|
|Meals (overnight business trips only)|
|(Or use simplified expenses with a flat rate by mileage)|
|Costumes (if you're an actor or entertainer)|
|Protective clothing (if needed for work)|
|Salaries of employees and staff|
|Employer’s National Insurance|
|Training courses (so long as related to your business)|
|Raw materials or stock|
|Direct costs involved in producing goods|
|Financial and Legal Costs|
|Bank, overdraft and credit card charges|
|Hire purchase interest|
|Self Employed Business Insurance|
|Advertising (e.g., newspapers or directories)|
|Giving out free samples|
|Costs related to a website|
|Professional or trade organisation membership fees|