When you’re self-employed, calculating your profits for tax purposes can be tricky. To deduct an expense, you must have made it for business use. But this doesn’t mean you can’t deduct something simply because you also use it outside business hours.
What expenses can I claim on my taxes as a self-employed person?
You can deduct some of the costs of running your business. You aren't allowed to claim private purchases, even if you've used money taken from your business.
What are allowable expenses?
The HMRC defines the allowable expenses the self-employed can claim. We cover a few of them below.
Claim these expenses on your taxes
Here are six expenses you may not have realised you can claim for when you’re self-employed.
Home office expenses
For many people, working from home is one of the main benefits of being self-employed. But did you know you can also claim expenses to cover the cost of running your business from home? Deductible home costs include things such as heating, lighting and telephone or internet bills.You can claim home office expenses in one of two ways:
- Analyse the actual running costs of your home and what proportion of these costs relate to your business.
- Use the flat rate method, where you include a fixed amount in your accounts based on the number of hours a month you work at home.
Business insurance for the self-employed
You can treat any insurance policies you need, including public or professional liability insurance, as business expenses and deduct the full cost.
Marketing expenses for your business
Your business won’t survive long without some marketing. Every business uses different tools, but allowable expenses include:
- Website costs
- Mailing out leaflets or letters
- Advertising in local newspapers or trade publications
- Free samples
Clothing and protective equipment
Any uniform or protective equipment such as safety boots, goggles or gloves count as an allowable expense. If you’re an actor or entertainer, you can treat any costumes as a business expense, too.
Training and personal development
Training expenses can be a confusing area if you’re self-employed. For tax purposes, there’s a difference between training that’s considered an investment and training that’s an expense.Training or personal development to keep your existing skills up to date counts as an allowable expense. This could be continuing education classes you need to keep your license in say, accounting.But if you want to learn something new, this counts as an investment. You can’t deduct this cost as a business expense. You’d need to claim capital allowances tax relief instead.
Travel and mileage expenses
For most small businesses, the easiest way of covering the costs of using your vehicle for work is by claiming a flat rate for mileage. You can use the following rates for business travel:
- 45p per mile for the first 10,000 miles for a car or goods vehicle
- 25p per mile for additional miles over 10,000 for a car or goods vehicle
- 24p per mile for motorcycles.
If you’ve already claimed capital allowances for your business vehicle, you can’t claim this flat mileage rate. You’ll need to break down your vehicle expenses in more detail. You can also claim expenses such as parking costs and toll fees as well as allowable expenses for train, bus, air or taxi fares, provided they relate solely to a business trip. Unfortunately, parking fines are not tax-deductible, so watch out.
