Allowable expenses to add to your Self Assessment tax return

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Allowable expenses to add to your Self Assessment tax return

With the support of from our friends at Sage, we are including a short series of extracts from their excellent advice columns for the self-employed and Sole Traders

We are about to hit ‘THAT’ time of year again when we really need to get to grips with the HMRC Self Assessment tax return. Understanding what your allowable expenses are, as HMRC calls them, can really help your business.

This is because expenses reduce your Self Assessment tax bill. If you have to pay the money anyway, as tax, why not have it pay for the things your business needs by creating expenses claims? We are listing the top 3 considerations, but there are many more – please contact us for more details and a FREE consultation.

Do you need to file a tax return? If you’re self-employed as a sole trader or the partner in a business partnership, then you will have to. And remember the deadlines for filing your Self Assessment tax return. It was midnight on 31 October 2019 for the paper version and midnight on 31 January 2020 if you submit it online.

Understand your allowable Expenses: Below are some things you can claim for. Note that we assume you’re using cash basis accounting, and the rules for traditional accounting can be slightly different. Remember that you can also use 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, and can make working out expenses significantly easier.

  1. Business Premises: Many sole traders run their businesses from their home, in which case 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.
  2. Stationery and phone bills: As well as the usual paper, envelopes and pens you can also claim back tax on postage and printing, including the costs of printer ink and cartridges that you use as part of your business.
  3. Professional and financial services: If you get advice from an accountant, lawyer or other professional as part of your business, then you can claim tax back on their fees. You can claim allowable expenses for hiring surveyors and architects for your business too, but not just for personal home improvements.
  4. Staff and Employee Costs: You can claim tax relief on employee and staff salaries, bonuses, pensions, benefits staff and employee costs, agency fees, subcontractors, and employer’s National Insurance contributions.
  5. Travel Costs: There’s a whole host of allowable expenses you can claim for if you have to travel for business, including train, bus, taxi, air fares and accommodation costs. These only apply if the primary reason for your journey or stay was for business.
  6. Clothing: Generally, you can’t claim for clothing, which is to say something you’d wear as part of an everyday wardrobe. So, even if you’ve bought a suit for work, you can’t claim for its cost. But, if you have to buy a uniform that identifies what you do, or you need special protective clothing to do your job, you can claim for that. You can’t claim for non-uniform items such as shoes and socks.
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