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Self-employed: tax allowable expenses

If you're self-employed, there are certain business expenses you are allowed to deduct from your tax bill. This guide explains the expenses you can and can't claim with HMRC when you're self-employed.

In this article
How do tax-deductible self-employed expenses work? Video: how do I pay tax as a self-employed person? What self-employed expenses can I can claim to reduce tax? Self-employed tax expenses if you use business premises Self-employed expenses if you work from home
Claiming travel and accommodation expenses Claiming expenses on salaries and benefits How does HMRC decide if I'm self-employed? Submit your 2018-19 tax return with Which?

How do tax-deductible self-employed expenses work?

While self-employed people are charged tax based on the amount of profit they've made in a tax year, there are a number of expenses you can claim that will lower your tax bill.

HMRC allows you to deduct the costs of certain purchases that are necessary to run your business. These costs can be deducted from your profit, and by doing so, will reduce the amount of tax you'll owe.

In general, unless something you buy for your business is a capital asset - such as a computer or machinery (which you claim for under different rules) - you can deduct its full cost when working out your taxable profits. 

You get immediate tax relief for the full amount. 

  • Get a head start on your 2018-19 tax return with the Which? tax calculator. Tot up your tax bill, get tips on where to save and submit your return direct to HMRC with Which?.

Video: how do I pay tax as a self-employed person?

Our short video below explains some of the expenses you can claim if you're self-employed.

What self-employed expenses can I can claim to reduce tax?

Knowing what you're allowed to claim can be complicated - especially as self-employed work can vary significantly from person to person.

See our lists below to work out your tax-allowable expenses.

Self-employed tax expenses if you use business premises

You can claim:

  • Heating
  • Lighting
  • Cleaning
  • Water rates
  • Rent
  • Business rates
  • General maintenance

You cannot claim:

  • Initial cost of buildings, alterations and improvements (such as extensions) - although such work may qualify for annual investment allowance or capital allowances.

 

Self-employed expenses if you work from home

You can claim a proportion of the costs for:

  • Lighting
  • Heating
  • Cleaning
  • Insurance
  • Mortgage interest
  • Council tax
  • Water rates
  • General maintenance

But you won't be able to write off all of your bills. The figures you submit should be based upon the floor area or number of rooms used for business, and the proportion of time the space is used for working.

The graphic below explains how this works, with an example. 

Bear in mind that if you start working from home, you might need to change your home insurance cover. Our Which? expert explains why your job can affect your home insurance quote.

If you work for 25 hours or more a month from home, you may be able to use HMRC's simplified expenses system.

Claiming travel and accommodation expenses

You can claim:

  • Travel and accommodation on business trips and between different places of work.
  • Running the costs of a car or other vehicle, including petrol, car tax, insurance, repairs and servicing.
  • If you use the car privately, you can only claim a proportion of the costs equal to how much the car is used for business purposes.
  • This is usually the ratio of your business mileage to your total mileage.
  • It's worth keeping a log of business mileage for a representative period, as well as all bills.

You can't claim:

  • Travel between home and workplace.
  • The cost of buying a vehicle (though it may qualify for capital allowances).
  • Meals, except a reasonable amount for breakfast and evening meals on overnight trips.

Claiming expenses on salaries and benefits

You can claim: 

  • Employees' wages and redundancy payments.
  • Employer's National Insurance
  • Insurance and pension benefits for employees
  • Any employee childcare provision you make
  • The cost of training employees

You can't claim:

  • Your own wages, salary or other money drawn from the business
  • Your own National Insurance contributions and income tax
  • Your own pension costs
  • Your own life insurance

How does HMRC decide if I'm self-employed?

HMRC distinguishes between people who work under a 'contract of service' - those employed by a company - and the self-employed, who work under a 'contract for services'. 

It uses some standard questions to decide which you are. If you can answer 'Yes' to all or most of the following, you will usually be accepted as being self-employed:

  • Can you hire someone to do the work or engage helpers at your own expense?
  • Do you risk your own money?
  • Do you provide the main items of equipment you need to do your job, not just the small tools that many employees provide for themselves?
  • Do you agree to do a job for a fixed price, regardless of how long the job may take?
  • Can you decide what work to do, how and when to do the work and where to provide the services?
  • Do you regularly work for a number of different people?
  • Do you have to correct unsatisfactory work in your own time and at your own expense?

Submit your 2018-19 tax return with Which?

Get a head start on your 2018-19 tax return with the Which? tax calculator. Tot up your tax bill, get tips on where to save and submit your return direct to HMRC with Which?.

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