Self employed business expenses – claiming tax relief

My main piece of advice to self-employed people is don’t miss out on reducing your tax because of unrecorded expenses. There are various business expenses self employed people incur. If you pay for anything which is incurred wholly and exclusively for the purpose of the business, you are able to claim that business expense against your profit and this reduces the amount of tax you will then pay.

If you’re looking for a list of business expenses for self employed people and how to claim tax relief, we’re here to help. Below are some examples of the business expenses that you should keep a record of for your self employment business.

Self employed business mileage

When travelling for your business, remember that you can claim mileage for those journeys.

If you’re wondering what counts as business mileage for self employed people, any journey which is undertaken wholly and exclusively for business purposes will qualify. A good example is travelling to and from a client meeting.

When you’re travelling for your business, you can claim 45p per mile for the first 10,000 miles and 25p per mile above that. This business mileage when included as a business expense reduces your taxable profit, reducing your tax liability.

The 45p/25p per mile which you can claim is designed to cover the fuel and wear and tear of your personal vehicle, and as a result this replaces claiming for the actual expenses incurred on your vehicle such as fuel, insurance and maintenance.

Depending on a self employed individual’s business, it may be more tax efficient to include the vehicle as an asset of the business. In this scenario you may then be able to claim capital allowances on the vehicle.

Subsistence

One of the self employed business expenses which can quickly add up is subsistence. When you travel for work and are away for a specific duration, the cost of meals and other subsistence can also be considered.

For example, if you’re out all day for business purposes and you buy a coffee, you could be entitled to claim this as an expense. If you’re travelling and staying overnight for a business trip, you’re entitled to tax relief on your accommodation and your meals for being away from home. Detailed records and receipts must be kept to support this but, if valid, these costs can be considered and included as a business expense for a year.

IT costs

Whatever the nature of your self-employed business, it’s likely that you’ll need IT equipment to run it – but people often don’t realise that this equipment can be a business expense with tax relief. We often see people using their own personal laptops or paying out of their own pocket for a computer, when they are absolutely entitled to claim these costs as business expenses when they are used for their business.

Working from home tax allowance

If you work from home to conduct your business, be sure to find out how to claim working from home allowance. You are entitled to claim tax relief to cover the costs which working from home incurs and there is currently a flat rate allowance of £6 per week that is accepted by HMRC.

If you undertake more hours working from home, you are able to claim more than this, but detailed records must be kept. In this scenario, it is best to speak to an advisor to ascertain what records are required and what can be considered so it can be calculated correctly.

Uniforms and safety workwear

One of the ways to reduce self employment tax which is often overlooked is claiming tax relief on repairing and replacing uniforms and specialist clothing needed for your work, for example branded uniforms, overalls or safety boots.

As long as the clothing is branded or is safety clothing, and you would only ever use it for your business, you are entitled to claim a tax deduction on it. Clothing that could be worn socially, like a suit which you might also wear to a wedding, isn’t covered.

My advice would be to make sure you’re on top of your record keeping, as the correct records can ensure you receive the necessary deduction against your business profits – for example if you spend £1,000 on uniform in a year and don’t claim, you’re missing out on £200 of relief if you’re a basic rate taxpayer.

The best way to keep tabs on these expenses is to snap a photo on your phone of the receipt whenever you buy workwear and upload it to the accounting software you use, so you have the record to claim the tax relief in your tax return.

Marriage tax allowance for self employed

Marriage tax allowance enables your spouse or civil partner to transfer £1,260 of their personal tax allowance to you. It is available to all qualifying individuals, not just the self employed. If your spouse is not working and not using their tax free personal allowance, this transfer means you won’t pay tax on an additional £1,260 of your income, which can save you up to £252 in tax per year.

Start a pension

If you’re an employee of a business, your pension contribution is automatically taken from your salary – but many self-employed people miss out on pensions and the tax relief they offer because they don’t organise a pension for themselves.

It’s worthwhile to set up a pension because there’s tax relief on the money you put into it if you are a higher rate taxpayer and that money can sit in the pension and grow over the years in a tax-free environment.

Self employed business expenses – we’re here to help

At Prime Accountants Group, we work with self employed people in various industries to ensure that they are being as efficient as possible in their tax planning and that they are benefitting from all the tax relief they are entitled to.