What business expenses can I claim if I am self-employed?

Full answer

Self-employed people, whether operating as a sole trader or in a partnership, can reduce their taxable profit, and therefore their Income Tax and Class 4 National Insurance bill, by deducting allowable business expenses from their gross trading income before the tax calculation is made. HMRC's general test is that an expense must be incurred 'wholly and exclusively' for the purposes of the business -- meaning genuinely necessary for running the business, not for personal benefit -- though some expenses with a mixed business and personal element, such as a home telephone or vehicle used for both business and personal journeys, can still be claimed on a reasonable, apportioned basis reflecting the business-use percentage. Common allowable expenses include the direct cost of goods bought for resale or materials used in providing a service, business insurance, professional subscriptions and training directly relevant to the trade, advertising and website costs, accountancy and legal fees, and business travel costs (though ordinary commuting between home and a regular fixed place of work is generally not allowable). Self-employed people working from home can claim a proportion of household running costs -- heating, electricity, council tax, mortgage interest or rent, insurance and similar -- based on either simplified flat-rate allowances published by HMRC (based on hours worked from home each month) or a more detailed calculation based on the actual proportion of the home used for business purposes. Capital expenditure on equipment, tools, computers or vehicles used in the business is generally claimed separately through capital allowances rather than as a simple day-to-day expense, most commonly via the Annual Investment Allowance, which allows the full cost to be deducted in the year of purchase up to a generous annual limit.

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