Got a self-assessment tax return to fill in but not sure what your business can claim back? Understanding what your allowable expenses are, as HMRC calls them, can really help your business.
Not sure if you need to file a self-assessment tax return in the first place? If you’re self-employed as a sole trader or the nominated partner in a business partnership, then you will have to.
And remember the deadline for filing your self-assessment tax return is midnight on 31 October if it’s the paper version and midnight on 31 January if you submit it online – the latter is the more popular option.
We’ll assume your business is using cash basis accounting, where you declare your income or expenditure only when it goes in or out of your company.
There are other accounting methods that can be used, such as traditional (accrual basis) accounting – check with an accountant if you’re not sure which method to opt for.
There are a number of allowable expenses that your business can claim for. They include:
- Business premises costs such as electricity and rates
- Stationery and phone bills
- Professional services such as banking and accountant fees
- Staff costs including wages
- Travel costs
- Clothing when dealing with safety gear and uniforms
- Stock or raw materials that you buy to sell on
- Marketing and advertising
A guide to tax returns will go into more detail in these areas to provide you with the information you require.
Even if you’re paying for the services of an accountant to help with your tax return, it pays to have a basic understanding of your allowable expenses so you can have the right discussions about your business affairs.
Here’s an excerpt from the self-assessment tax return guide:
Costs related to your business premises
You can claim tax back on things such as lighting, heating, water rates, rent, business rates and insurance for your business premises.
If you work from home, you can only claim tax back on the part of these expenses that you use for your business, including heating, electricity, council tax and mortgage interest.
You’ll need to find a realistic way of dividing the costs. You may be able to divide your bills according to the number of rooms you use for your business, or the amount of time you spend working from home.
You can avoid having to do complex calculations to work out your allowable expenses by using simplified expenses.
These are flat rates that you can use to calculate tax relief on vehicles, working from home and living on your business premises.
Check out the HMRC’s advice on who can claim simplified expenses and use its online checker to work out if this would be a good solution for your business.