A quick guide to which business expenses you can claim if you’re self-employed

Confused about what expenses you can and can’t claim for business? Here’s a quick guide to help you.

All business owners incur costs and expenses in the day-to-day running of their business – but do you know which costs you can and can’t claim to reduce your tax bill? While some costs are straightforward, others are less so. 

In this guide Emily Coltman FCA, Chief Accountant to FreeAgent – who provide online accounting software for small businesses and freelancers – examines the most common costs which are not straightforward for tax.

Claiming for the cost of travel and accommodation

One of the most common mistakes small business owners make when they claim expenses for business travel is to also include elements of the journey that were in fact private.

For example, if you spend three nights in Brighton on business and stay an extra day to see the sights, you can only claim tax relief for the first three nights. The cost of accommodation for the final night has to be deducted before you can claim tax relief, which is easy to do. 

However, if you can’t easily split the business and private costs you wouldn’t be able to claim any of the cost. For example, if you drive to a client meeting but stop en-route to see a friend you wouldn’t be able to claim any of the journey as a business cost because the time can’t be easily split between business and private.

Travel in your own car

Many business owners travel on business in their own cars, but can you claim for this cost?

As sole traders and partners (where none of the partners are limited companies) travelling in a car or goods vehicle, you can claim 45p/mile for the first 10,000 miles you travel for business in the tax year then 25p/mile for anything over this.

However, in order to claim using the above method, you can’t have claimed capital allowances on your vehicle. If you’re a limited company director you can also claim business mileage back from the company as an employee instead of using this method.

Food and drink expenses

As everyone must eat in order to live, HMRC has put a few restrictions on when you can and can’t claim the cost of food and drink as a business expense. For example, if you’re a sole trader, you can only claim the cost of food and drink when:

  • You’re away from your usual place of business overnight.
  • You’re making a journey outside of your normal work routine, for example, travelling out of town to give a presentation.
  • Your job involves carrying out work on a number of different sites, for example, if you’re a jobbing builder who constantly moves to different building sites.

For employees – which includes limited company directors – the rules are slightly different and you can claim the cost of all food and drink when you’re travelling for business. 

Business use of home

Did you know you might be able to claim some of the costs of running your home as expenses using a HMRC’s simplified flat rate? The scheme is an option if you:

  • Work from home for more than 25 hours per week.
  • Are a sole trader or a partner in a partnership where none of the partners are limited companies.

The flat rate is based on the number of hours you work at home each month:

  • 25-50 hours per month: claim £10 per month.
  • 51-100 hours per month: claim £18 per month.
  • 101+ hours per month: claim £26 per month.

Alternatively, you can claim a percentage of your actual home running costs for your business, or you can mix the two and use the flat rate allowance for your light, heat, and power, and a percentage of your actual costs for the rest.

Hopefully the above helps you understand more about what you can and can’t claim as a self-employed business owner. Remember to always check with your accountant if there’s anything that you’re not clear about.

Emily Coltman FCA is Chief Accountant to FreeAgent, who provide award-winning online accounting software designed to meet the needs of small businesses and freelancers.

Photo by Kelly Sikkem