Filing your Self Assessment Tax Return can be stressful, especially if you don’t know what expenses you can claim. However, claiming the right expenses can reduce your tax bill, saving you money. As a self-employed person or small business owner, knowing what you can and cannot claim is important to avoid overpaying taxes.
In this blog, we will explain what expenses you can claim on your Self Assessment Tax Return. This will help you understand how to lower your taxable income and pay the right amount of tax. By the end, you’ll feel more confident about your tax return.
What is a Self Assessment Tax Return?
A Self Assessment Tax Return is a form that self-employed individuals, sole traders, and business owners use to report their income and expenses to HMRC (Her Majesty’s Revenue and Customs). The tax return allows HMRC to calculate how much tax you owe.
If you are self-employed, you must fill out a Self Assessment form every year. You report your income and any business-related expenses. The expenses you claim will reduce your total income, which can lower the amount of tax you need to pay.
Why Is It Important to Claim Expenses?
Claiming business-related expenses is important for two reasons:
Reduces Taxable Income – Business expenses are deducted from your income before tax is calculated. This means you only pay tax on your net income (total income minus expenses).
Saves Money – The more legitimate expenses you claim, the lower your tax bill. This can help you save money, especially if your business has many costs.
But, remember, you can only claim expenses that are related to your business. Personal costs or expenses unrelated to your work should not be claimed.
Types of Expenses You Can Claim
Now let’s look at the common expenses you can claim on your Self Assessment Tax Return. These are general business costs that help your business run smoothly. Make sure you keep all receipts and records to prove your expenses.
1. Office Costs and Supplies
If you have a home office or rent an office space, you can claim the costs of running that office. Here are some examples:
Office rent: If you rent an office, you can claim the rent as an expense.
Office supplies: You can claim costs for stationery, printer ink, and other office supplies.
Utilities: Electricity, heating, and water for your office space can be claimed if they are used for your business.
Internet and phone bills: If you use your phone or internet for business purposes, you can claim a portion of these bills.
Important: If you work from home, you can claim a percentage of your household bills based on the space used for work. For example, if your home office takes up 10% of your home, you can claim 10% of your bills.
2. Travel Expenses
When you travel for business, you can claim the following travel-related expenses:
Public transport: Train, bus, or taxi fares for business trips.
Mileage: If you use your car for business purposes, you can claim mileage expenses. This can be done using HMRC’s approved rates (45p per mile for the first 10,000 miles and 25p per mile thereafter).
Parking: Business parking fees can also be claimed.
Accommodation: If you need to stay overnight for business, hotel bills can be claimed.
Remember, any travel that is purely for personal reasons cannot be claimed. The travel must be directly related to your business.
3. Business Equipment
Business equipment can be claimed as an expense. This includes:
Computers and laptops: If you use a computer or laptop for business, you can claim part of the cost.
Furniture: Items like desks, chairs, and filing cabinets can be claimed if used for business purposes.
Software and tools: If you purchase software to run your business, like accounting software or design tools, you can claim those costs.
For expensive items, you may need to claim the cost over several years as part of Capital Allowances.
4. Staff Costs
If you have employees or freelancers, you can claim the following:
Salaries and wages: Any payments made to employees or subcontractors are tax-deductible.
National Insurance contributions: You can claim the employer’s National Insurance contributions.
Pension contributions: If you contribute to employee pensions, you can claim this as a business expense.
5. Training and Development
You can claim costs for training that improves your skills and benefits your business. For example:
Work-related courses: If you attend a course to improve your knowledge in your business area, you can claim the fees.
Books or materials: Books and other resources related to your business can also be claimed.
However, you cannot claim for personal development or training not directly related to your business.
6. Marketing and Advertising
Marketing is key to growing your business. You can claim expenses related to promoting your business, including:
Advertising costs: Ads in newspapers, online ads, and flyers can be claimed.
Website costs: If you pay for website hosting, domain names, or website design, these are business expenses.
Social media campaigns: If you pay for ads on social media, you can claim these costs.
7. Professional Fees
If you need professional help to run your business, you can claim those expenses. These include:
Accountants: If you hire an accountant to help with your tax return or other financial matters, you can claim their fees.
Legal fees: If you pay a lawyer for business-related advice, you can claim these costs.
However, if you have legal fees related to personal matters, they cannot be claimed.
8. Bank Charges and Interest
You can also claim the cost of any business bank accounts, credit card fees, and interest on business loans. If you use your personal bank account for business, only the portion used for business should be claimed.
9. Business Insurance
If you pay for any insurance policies related to your business, such as public liability or professional indemnity insurance, you can claim these costs.
10. Bad Debts
If a customer owes you money and you are unable to collect it, you may be able to claim the amount as a bad debt expense. This only applies if you’ve made all reasonable attempts to recover the debt.
What You Can’t Claim
There are some expenses you cannot claim. These include:
Personal expenses: Anything that is not related to your business cannot be claimed.
Clothing: Unless it is required for your business (e.g., uniforms), you cannot claim for regular clothing.
Home office improvements: You can claim a percentage of your household bills for home office use, but you cannot claim for home improvements, such as installing new windows or a new kitchen.
How to Keep Track of Your Expenses
Keeping accurate records of your business expenses is crucial. You need to keep receipts, invoices, and bank statements that show your expenses. A good system for tracking your expenses will make filling out your Self Assessment Tax Return easier.
You can use accounting software or hire an accountant to help you keep track of everything. Make sure to store all documents for at least 5 years after the tax year they relate to, in case HMRC asks for them.
Conclusion
Filing your Self Assessment Tax Return can be confusing, but knowing what expenses you can claim makes it easier. By claiming the right expenses, you can lower your taxable income and reduce your tax bill. Make sure to keep good records, claim only business-related costs, and reach out to an accountant if you need help.
If you’re unsure about what you can claim, City Gates Accountants is here to help. Contact us today for professional advice on managing your expenses and completing your tax return!
FAQs (Frequently Asked Questions)
1. What expenses can I claim if I work from home?
If you work from home, you can claim a percentage of your household bills (e.g., electricity, gas, internet). The percentage depends on how much of your home is used for business.
2. Can I claim for my car expenses?
Yes, if you use your car for business, you can claim mileage expenses or actual costs (fuel, repairs). However, you can’t claim for personal use of your car.
3. How do I prove my expenses?
You should keep receipts, invoices, and bank statements that show your expenses. This is important in case HMRC asks for proof.
4. Can I claim for meals?
You can only claim meals if they are business-related, like during business trips. However, you cannot claim meals for everyday work-related expenses.
5. What if I’m unsure whether something is a valid expense?
If you’re unsure, it’s best to check with an accountant. They can help ensure you’re claiming the correct expenses and complying with tax laws.