Allowable business expenses

Allowable Expenses

A question we are often asked is “As a self employed person what can I claim as a business expense?”

The basic rule is that an expense is allowed as a small business tax deduction if it is incurred 'wholly and exclusively' for the purposes of the business. Where any non business use is small and incidental to the business use, a claim can still usually be made.

All items on this list can be claimed as small business tax deductions

  • Materials or services bought with the purpose of re-selling them
  • Payments to sub contractors
  • Premises costs such as rent, rates, water, gas, electricity
  • Wage costs of employees
  • Repairs and maintenance, including painting, electrical repairs, joinery, machinery repairs, computer equipment, office furniture
  • Telephone and internet costs
  •  Insurance costs
  • Stationery, printing and postage costs
  • Postage
  • Subscriptions to business organisations
  • Business related books and specialist magazines
  • Software
  • Vehicle expenses, including servicing, road tax, insurance, fuel, although these claims are usually subject to a restriction for private use.  Claims are not allowed for speeding or parking fines. Sometimes an alternative claim for fixed mileage allowance can be claimed instead.
  • Travel and accommodation, as long as it is necessary for business purposes
  • Advertising
  • Exhibition or trade fair costs
  • Training courses -  although only allowable if skills are being refreshed. Learning a new skill is specifically not allowable as a tax deduction
  • Protective clothing (not normal everyday clothing)
  • Accountants fees
  • Most but not all legal fees
  • Interest and set up fees on loans taken out
  • Bank charges
  • Credit card charges
  • Leasing of machinery or equipment
  • Leasing of vans
  • Leasing of cars -  subject to a restriction on the allowance
  • Use of home expenses#
  • Staff entertainment or parties, up to certain limits
  • Bad debts written off -  not including debts you think may become bad - they have to be completely uncollectable at the date of claim
  • Capital allowances - can be complex - further advice may be needed

What can't be claimed?

Some expenditure is specifically not deductible for tax even though it may be a genuine business expense:

  • Business entertaining including the VAT 
  • Charitable subscriptions and donations, except to small local charities
  • Political donations
  • Fines
  • Loan Capital Repayments
  • Drawings, including payments for tax and National Insurance contributions
  • Depreciation, although a replacement claim for capital expenditure can often be made. Expenditure on plant and machinery for most small businesses is usually covered by the annual investment allowance of up to £200,000 

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