Allowable Expenses for Self-Employed in UK

Every year in UK, self-employed individuals have to fill out their self-assessment tax return to HMRC, showing their income for the year and the income tax they’re entitled to pay based on that.
Part of filling your self-assessment is consisted of finding out your expenses-some of which you can reduce from your tax bill, but you must pay tax on others.

Working on your tax return can be a challenging task, especially when ironing out in-depth details such as allowable expenses. So, when you choose the best accountants in London, they will make easy procedure of simplifying the expense side of things for you, dividing what expenses are allowable and what not.

What types of Self-employed expenses are allowable?

When you’re working on your tax return, look into some of the costs that comes under allowable expenses.

Office expenses

It can consist of printing costs including printer ink, business stationery and postage. You can also involve business equipment such as computer software, computer and printers, but you need to claim these as capital allowances if you don’t employ cash basis accounting.

Business premises

Expenses can be claimed for repair and maintenance, utility bills, rent, property insurance and security. But for building or buying their business premises—such expenses can’t be claimed.
You can include some of your home utility bills, if you’re running your business from home but you need to calculate the proportion of your home that’s been used for business, and how much proportion used for the month it’s being used for business purposes.

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You can use simplified expenses which means a flat monthly rate calculated by the government, only if you’re working from home at least 25 hours a month.

Travel Expenses

The self-employed persons can include business related van or car costs which includes fuel, hire charges, vehicle insurance, repairs, servicing and breakdown cover. This can be tedious to calculate, so one can employ simplified vehicle expenses that is a flat rate offered by the government.

You can also include business traveling expenses by bus, plane or taxi, train and hotel rooms and meals during business overnight trips.

Always remember that travel for site visits, meetings etc. is involved but you can’t claim for the travelling cost between home and work, so travelling or commuting to your business premises doesn’t include.
And if you’re taking a journey for both business and personal reasons, you must be able to segregate the business cost so as to include it.

You can’t claim for entertaining suppliers, clients and customers or event hospitality.
Financial and Legal Costs

If you are required to hire a professional like a solicitor, accountant, a surveyor or an architect for business purposes, you can add up the cost in your calculation.

You can also involve overdraft, bank and credit card charges, hire purchase interest, leasing payments and interest on bank and business loans. Always remember, you can claim only up to £500 in interest and bank charges, if you’re using cash basis accounting.

Stock and materials Expenses

You can involve the cost of your raw materials, stock and the direct costs that generate while producing your goods.

Business Insurance Expenses

You can involve the cost of business insurance such as professional indemnity insurance and public liability insurance.

Marketing Expenses

You can claim the marketing cost such as directory listings, free samples, website costs, mailshots and newspaper advertising.

Staff Costs Expenses

Employee and staff salaries come under allowable expenses, alike benefits, bonuses, pension contributions, employer National Insurance contributions and agency fees.

Clothing Expenses

The essential protective clothing, cost of uniform or costumes for entertainers or actors can be included but everyday cost of clothing that you wear to work can’t be included.

Subscriptions Expenses

The relevant costs to your business and subscriptions cost to trade or professional journals can be included which also cover the cost of membership to professional membership organizations and trade bodies.

How to calculate your business expenses for your tax return?

When tax return is completed, you may be given with an option of giving a detailed breakdown or give a single figure for your allowable expenses.

If you prefer entering a single figure, you still require to accurately work out all your expenses and maintain a record of your doings if HMRC inquires for your figures.

You should also maintain receipts or other purchase proof. You don’t require to include these with your tax return, but at the time of tax investigation it can be presented to HMRC by you.

Tax can be complex, and are subjected to heavy fines if you have a made a mistake while filing your tax return. You can choose a team of small business accountants who are highly experienced professionals in helping you out through your self-assessment process. Well, choice is yours!

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