What can you claim as allowable expenses?
You can reduce your tax payment by deducting allowable expenses, so it’s important to know what you can claim on.
What are allowable expenses?
Allowable expenses are running costs for your business. You can deduct them from your profit, so you don’t pay tax on them when you submit your Self Assessment tax return. The profit left over after expenses are deducted is known as ‘taxable profit’.
There are certain types of expenses which are allowable. For example, you can’t count private purchases as allowable expenses. You also can’t claim expenses if you use your £1,000 tax-free ‘trading allowance’.
What you can claim as allowable expenses
You can claim for stationary, rents, rates, power and insurance costs. You can’t claim expenses or allowances for buying building premises.
You can claim for car, van and travel expenses. You can’t claim for non-business driving or travel costs, fines or travel between home and work.
You can claim for uniforms, protective clothing needed for your work and costumes for actors or entertainers. You can’t claim for everyday clothing even if it’s worn to work.
You can claim for:
- Employee and staff salaries
- Agency fees
- Employer’s National Insurance
- Training courses directly related to your business
You can’t claim for carers or domestic help.
You can claim for goods you buy for resale and keep as stock, raw materials and direct costs from producing goods. You can’t claim for any goods or materials bought for private use or depreciation of equipment.
Legal and financial costs
You can claim for accountancy, legal and other professional fees. You can’t claim for legal costs of buying property and machinery (if you use traditional accounting, you can claim these as capital allowances), or fines for breaking the law.
You can claim for insurance policies, bank, credit card and other financial charges, but not on loans, overdrafts or finance arrangements.
Advertising, marketing and entertainment
You can claim for:
- Advertising in newspapers, directories or by bulk mail
- Free samples
- Website costs
- Trade or professional journal subscriptions
- Trade body or professional organisation membership if related to your business
You can’t claim for:
- Entertaining clients, suppliers and customers
- Event hospitality
- Payments to political parties
- Gym membership fees
- Donations to charity
You can only claim on training courses that are directly related to your business, and allow you to expand your knowledge or skills. You can’t claim on courses that help you start a new business, or expand into new areas of business.
Claiming expenses for both business and personal use
If you have an allowable business expense that is used for both business and personal use, for example if you work from home and are claiming on internet bills, you need to find a reasonable way of dividing your costs based on how much you use the expense for your business.
Manage your expenses with Bokio
Bokio accounting software has everything you need to manage your business finances in one place.
With Bokio accounting software, you can do your bookkeeping, invoicing, and manage your finances. We have everything you need to help you prepare for your Self Assessment tax return, submit your VAT Return for Making Tax Digital and keep the right financial records. If you need an extra hand, we can help you find an accountant to work with.
Accounting is kept simple, so you have more time to spend managing your business.
This article was updated February 2022.