Being self-employed in today’s competitive environment is challenging, and the inevitable expenses make things more difficult. While you can’t ignore many business costs, you can claim allowable expenses to reduce your income tax bill and save money. The tax specialists at our firm have explained everything you need to know about allowable expenses.
Allowable Expenses
Every business has some essential costs like supplies, rent, bills, etc., which are known as allowable expenses. You don’t have to pay taxes on these expenses if you successfully claim them because they aren’t considered taxable profits. Doing this allows companies and self-employed individuals to reduce their taxes and save money to scale their businesses. However, this tax deduction can only happen if your allowable expenses are exclusively for business purposes.
Here are the allowable expenses you can claim as a self-employed or sole trader.
Hiring Costs
As a business, you need to hire multiple professionals like solicitors, accountants, architects, tax advisors, etc. The costs involved in their hiring or salaries can be claimed as allowable expenses.
Staff Costs
Similarly, the salaries you pay your staff or directors are eligible for a tax deduction, so make sure you claim them while calculating your self-assessment expenses.
Office Supplies
After personnel, the essential part of running any business is its supplies. Things like business stationery, desk phone, printing costs (including ink and cartridges), software (used for less than two years or requiring annual renewable license fees), computers, or any equipment you use for business purposes.
If you’re running your business from home, you can even claim allowable expenses on your home devices like computer, phone, internet, etc. but only the amount incurred for your business activities. For example, if the 70% consumption of your home’s phone is for business purposes, you can only claim those costs and not the remaining 30% used for personal calls.
Mileage Allowance
You can claim a mileage allowance as a self-assessment tax return if your business involves travelling. HMRC offers mileage allowance for expenses like fuel, license fees, repairs, insurance, parking fees, vehicle hire charges, etc. In addition, if you had to book hotel rooms, taxi, train, flight, or bus rides during your business trips or had meals during these trips, they could qualify as allowable expenses. The only condition is that these expenses were solely for business purposes; otherwise, you may face penalties.
Clothing Costs
If your business requires protective clothing, uniforms, or costumes, you can claim these expenses as allowable expenses. However, the usual outfits you wear to work don’t qualify as allowable expenses.
Besides these expenses, there are many other allowable expenses that you can claim depending on your business. If you want to learn more about them and how much money you can save on each expense, hire our tax advisors.
At IBISS & CO we offer comprehensive accounting services for small businesses and self-employed individuals in London and Walsall. We have some of the most talented corporation tax specialists, business tax advisors, and accountants on board. Contact us now to discuss your needs and get started.
