Expenses and allowances for the self-employed Derby

Guide to Self Employed Expenses

Expenses must relate to the running of your business.

Allowable / Non Allowable Expenses (Table 1)

Category	Allowable expenses	Non allowable expenses
Accountancy, legal & other professional fees.	Accountants, solicitors, surveyors, architects.	Legal costs of buying property. Costs of settling tax disputes and fines.
Advertising & business entertainment costs.	Advertising in newspapers, directories & website costs.	Entertaining clients, suppliers & customers; hospitality at events.
Bank, credit card & other financial charges.	Bank, overdraft, credit card charges, HP interest & leasing.	Repayment of the loans or overdrafts or finance arrangments.
Car, van & travel expenses.	Car & van insurance, repairs, servicing, fuel, parking, RFL, business travel & subsistence.	Non business motoring costs (private use proportions). Costs of buying vehicles. Travel costs between home and business.
Communications, stationery & other office costs.	Phone, mobile, internet, postage, stationery, printing, office equipment, software.	Non business or private use proportion of expenses.
Construction industry payments to subcontractors.	Construction industry payments to subcontractors. (before taking off any tax)	Payments for non business work.
Cost of goods that you are going to sell.	Cost of goods bought for resale.	Cost of goods or materials bought for private use.
Depreciation & loss/profit on sale of assets.	Depreciation & loss/profit on sale of assets are not allowable expenses	Depreciation of equipment, cars etc. Losses on sales of assets

Allowable / Non Allowable Expenses (Table 2)

Category	Allowable expenses	Non allowable expenses
Insurance policy.	Costs of any business specific policy.	Recoverable costs.
Interest on bank and other business loans.	Interest on bank and other business loans.	Repayment of the loans or overdrafts, or finance arrangements.
Irrecoverable debts written off.	Amounts included in turnover but unpaid and written off because they will not be recovered.	Debts not included in turnover; general bad debts.
Other business expenses.	Trade journals and subscriptions; other sundry business running expenses not included elsewhere.	Payments to clubs, charities, political parties etc.; non business part of any expenses; cost of ordinary clothing.
Rent, rates, power and insurance costs.	Rent for business premises, business and water rates, light, heat, power, property insurance, security; use of home as office (business proportion).	Costs of any non business part of premises; costs of buying business premises.
Repairs and renewals for property and equipment.	Repairs and maintenance of business premises and equipment; renewals of small tools and items of equipment.	Repairs of non business parts of premises or equipment; costs of improving or altering premises and equipment.
Wages, salaries and other staff costs.	Salaries, wages, bonuses, pensions, benefits for staff or employees; agency fees, subcontract labour costs; employers’ NICs etc.	Own wages and drawings, pension payments or NICs; payments for non business work.

Self-Employed pages ► Self Employed sole traders ■ Registration and National Insurance ■

The general rule is that a self employed person cannot deduct expenses unless they are ‘wholly and exclusively’ laid out for the purposes of the trade, profession or vocation. Two tables of the most common allowable and disallowable expenditure are shown above (Tables 1 & 2).

Motoring expenses - If you use a car both for business and privately, you can claim a proportion of the running costs in the ratio of your business mileage to your total mileage. You must keep a log of business mileage as well as copies of all bills/receipts to calculate the appropriate deduction. You can alternatively use a fixed rate per business mile to compute vehicle expenses instead of keeping detailed records of actual expenditure. This method is available if the annual turnover of a business is less than the VAT registration threshold.

Use of home as office - Where a room at home is used wholly and exclusively for business purposes, a deduction may be claimed for a portion of: insurance, council tax, mortgage interest, rent, repairs and maintenance, cleaning, heat, light and power, broadband and telephone.

Administrative costs, including mobile phone - You can deduct the administrative costs of running your business, including advertising, stationery, postage, telephone and fax.

Disallowed expenses - Some expenses are never allowable for tax purposes, for example, entertaining clients, even if such entertainment directly led to new business.

■ Record keeping ■ Allowable Expenses ■ Home Working Costs ■ Fixed Rate Expenses ■

■ Cash Basis for the Self-Employed ■ Registering for VAT ■ Forming a Limited Company ■

Registered office: 61 Friar Gate, Derby, Derbyshire, DE1 1DJ T: 01332 202660

Adrian Mooy & Co is the trading name of Adrian Mooy & Co Ltd. Registered in England No. 05770414

Registered as auditors in the United Kingdom by the Association of Chartered Certified Accountants auditregister.org.uk 8011438

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01332 202660

61 Friar Gate Derby DE1 1DJ

EXPENSES & ALLOWANCES - SELF EMPLOYED

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