Tax for the self-employed Self-employed: tax allowable expenses
Not all business expenses are tax deductible, so it's important to make sure you claim all that you can.
In general, if something you buy for your business is not a capital asset, you deduct its full cost when working out your taxable profits.
This means you get immediate tax relief for the full amount.
Here are some key expenses you can claim and some you can’t. For more information, see the SA103 notes.
Expenses you can claim...
Salaries and benefits
- Employees’ wages and redundancy payments
- Employers’ National Insurance
- Insurance and pension benefits for employees
- Any employee childcare provision you make
- The cost of training employees
Dedicated business premises
- Heating
- Lighting
- Cleaning
- Water rates
- Rent
- Business rates
- General maintenance
If you work from home
A proportion of costs such as:
- Lighting
- Heating
- Cleaning
- Insurance
- Mortgage interest
- Council tax
- Water rates
- General maintenance
The proportion should be based on, say, the floor area or number of rooms used for business, and the proportion of the time it is used for business if it is not for exclusive use.
Travel and accommodation
Running costs of a car or other vehicle – petrol, car tax, insurance, repairs and servicing. If you also use the car privately, you can claim only a proportion – usually the ratio of your business mileage to your total mileage (keep a log of business mileage for a representative period as well as all bills).
Travel and accommodation on business trips and between different places of work can be claimed as well.
...and expenses you can’t
Salaries and benefits
- If you are self-employed you cannot claim your own wages, salary or other money drawn from the business
- Your own National Insurance contributions and income tax; your own pension costs, life insurance.
Premises
- You cannot claim the initial cost of buildings, alterations and improvements (such as extensions to house your business) – such work may qualify for annual investment allowance or capital allowances.
- A proportion of bills relating to private use of your home.
Travel and accommodation
- Travel between home and workplace
- Cost of buying a vehicle (but may qualify for capital allowances)
- Meals, except reasonable amount for breakfast and evening meals on overnight trips. (There is no definition of ‘reasonable’. You must keep receipts and may need to argue your case.)
If you can divide an expense between business and personal cost (car running costs between business and personal travel, say), the business proportion is deductible. If the nature of the expense means it cannot be divided (such as the cost of a transatlantic flight), then no deduction is allowed.
To learn more about self-employment and the expenses you can and cannot claim, see our books Working for Yourself or Tax Handbook 2011/12.
- Tax query? Speak to our experts on the Which? Money Helpline
- Want to save on tax? Take a look at our 30 ways how to
- Take a look at our guide to tax relief's, allowances and amounts
