If you’re self-employed, your business will have various running costs. You can deduct some of these costs to work out your taxable profit as long as they’re allowable expenses.
For example, if your turnover is £40,000, and you claim £10,000 in allowable expenses. You only pay tax on the remaining £30,000 - known as your taxable profit.
Allowable expenses don’t include money taken from your business to pay for private purchases.
If you run your own limited company, you need to follow different rules. You can deduct any business costs from your profits before tax. You must report any item you make personal use of as a company benefit.
Costs you can claim as allowable expenses
- office costs, eg stationery or phone bills
- travel costs, eg fuel, parking, train or bus fares
- clothing expenses, eg uniforms
- staff costs, eg salaries or subcontractor costs
- things you buy to sell on, eg stock or raw materials
- financial costs, eg insurance or bank charges
- costs of your business premises, eg heating, lighting, business rates
- advertising or marketing, eg website costs
- training courses related to your business, for example refresher courses
Contact the Self Assessment helpline if you’re not sure whether a business cost is an allowable expense.
Costs you can claim as capital allowances
- business vehicles, eg cars, vans, lorries
If you use cash basis
If you use cash basis accounting and buy a car for your business, you can claim this as a capital allowance. However, all other items you buy and keep for your business should be claimed as allowable expenses in the normal way.
If you use something for both business and personal reasons
You can only claim allowable expenses for the business costs. For example, your mobile phone bills for the year total £200. Of this, you spend £130 on personal calls and £70 on business. You can claim for £70 of business expenses.
If you work from home
You may be able to claim a proportion of your costs for things like:
- mortgage interest or rent
- internet and telephone use
You’ll need to find a reasonable method of dividing your costs, eg by the number of rooms you use for business or the amount of time you spend working from home.
You can avoid using complex calculations to work out your business expenses by using simplified expenses. Simplified expenses are flat rates that can be used for:
- working from home
- living on your business premises
Know your legal responsibilities
- Do you need a licence?
- Get the right business insurance
- Comply with the law when providing goods and services
- Know your customers' rights
- Distance and online selling rules
- Understand pricing legislation
- Buying goods from outside NI
- Selling goods outside NI
- GDPR compliance checklist
- Pay your business rates
- Understand staff contracts and your responsibilities
- Taking on contractors and subcontractors
- Health and safety basics for business
- Know your legal obligations on pensions
Understand tax and VAT
Sell and market your products or services