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Guide to Self Employed Expenses
Expenses must relate to the running of your business.
Allowable / Non Allowable Expenses (Table 1)
||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)
||Non allowable expenses
|Insurance policy.||Costs of any business
|Interest on bank and other business loans.||Interest on bank and other
|Repayment of the loans or
overdrafts, or finance
|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
|Payments to clubs, charities,
political parties etc.; non
business part of any
expenses; cost of ordinary
|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
|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
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.
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
61 Friar Gate Derby DE1 1DJ