As someone who is self-employed, or a sole trader, you will need to submit an annual tax return to Her Majesty’s Revenue and Customs (HMRC). There are a number of expenses you can claim at this point, which offset your turnover and can help to reduce your tax bill. Here, we explain what you can claim, and how good business expense management can help your business to be successful.
What can you claim?
There are a number of allowable expenses that you can claim – things that are essential to the operation of your business. It’s worth checking out the relevant pages on HMRC’s website too, as they give the full range of expenses you can claim. Make sure you check, because some of the things you may think you can claim – or should be able to claim – may not be allowed.
Your premises – many self-employed people work from home, but plenty of people rent office space, or a desk space within an office. If you rent an office, you can claim the rent, and payments that you have to make to maintain your space, or repair it. You can also claim utility bills and relevant insurances. Similarly, if you work from home, you can claim a proportion of your domestic costs, such as insurance, utilities, phone and broadband. You have to calculate this based on the proportion of your home that you use, and the number of hours you work. HMRC also has a flat calculation rate you can use if you work more than 25 hours a month from home.
Stationery and supplies – You can claim expenses for the money you spend on essential office supplies. This might include postage, general stationery and printer inks. Other essential equipment, like computers, laptops, phones, printers and photocopiers are counted as capital equipment, which is treated slightly differently, and you many need to talk to your accountant to make sure you get this right.
Mileage and travel – where you have to travel for your business, you can claim various relevant expenses. These include mileage, which you can charge at a rate fixed by HMRC. You can also claim for business-related car-parking, a proportion of your insurance if your car is also used for personal journeys, and all journeys on public transport that are required for you to do your job. If you need to stay away from home, you can claim hotel expenses, and all foreign travel that is made for your job. Also, it is useful to remember that you can’t claim for your journeys to and from work.
Professional fees – you may have an accountant to manage your finances, or use a solicitor to help you with contracts. You may also have to pay bank charges on your business account. All of these costs are claimable for the purposes of expense management. Virtual assistant services, bookkeeping help and other associated fees may also be claimable – check with your accountant.
Subscriptions and professional bodies – if you can demonstrate that they are directly related to your business, you can claim the cost of subscriptions to magazines, journals and websites, along with any fees you may pay to be a member of a professional body.
Marketing and sponsorship – money that you spend on marketing your business or raising your profile can be claimed against your total turnover. This can include sponsorship of local events, attending networking meetings or being part of business-related groups.
Stock and materials – if you are a product-based business, you can take into account the cost of stock, materials, supplies and sundries that you have bought during the relevant tax year. If you are using a virtual assistant to manage business expenses, they may suggest that you speak to your accountant about how to accurately account for stock in your business.
Insurances – you may have liability insurances for your business, or straightforward business premises and contents insurance. These are expenses that you can claim when you fill in your tax return.
Do you need an expense manager?
Depending on how much time you have, and the extent of your expenses, you might want to consider using an expense manager. Virtual assistant services can help here – managing not just your bookkeeping but your expense accounting, allowing you to be confident that records are properly kept, and be able to present your accountant with a reliable account when your tax return is due. Business expense management is straightforward and it’s easy to outsource expense management so that you can concentrate on your business at all times.