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If you鈥檙e self-employed, your business will have various running costs. You can deduct some of these costs to work out your taxable profit as long as they鈥檙e allowable expenses.

For example, if your turnover is 拢40,000 and you claim 拢10,000 in allowable expenses, you鈥檒l only pay tax on the remaining 拢30,000 - known as your taxable profit.

Allowable expenses do not include money taken from your business to pay for private purchases.

Costs you can claim as allowable expenses

You can only claim for costs related to business purchases, including:

• office costs, for example stationery or phone bills
• travel costs, for example fuel, parking, train or bus fares
• clothing expenses, for example uniforms
• staff costs, for example salaries or subcontractor costs
• things you buy to sell on, for example stock or raw materials
• financial costs, for example insurance or bank charges
• costs of your business premises, for example heating, lighting, business rates
• advertising or marketing, for example website costs
• training courses related to your business, for example refresher courses

If you鈥檙e not sure whether a business cost is an allowable expense contact HM Revenue and Customs (HMRC).

Costs you can claim as capital allowances

If you use traditional accounting, claim capital allowances when you buy:

• equipment
• machinery
• business vehicles, for example cars, vans, lorries, bicycles

If you use cash basis

If you use cash basis accounting and buy a car for your business, you can claim capital allowances on the cost of the purchase. However, all other items you buy and keep for your business should be claimed as allowable expenses in the normal way.

If you use something for both business and personal reasons

You can only claim allowable expenses for the business costs.

If you work from home

You may be able to claim a proportion of your costs for things like:

• heating
• electricity
• Council Tax
• mortgage interest or rent
• internet and telephone use

You鈥檒l need to find a reasonable method of dividing your costs, for example by the number of rooms you use for business or the amount of time you spend working from home.

Simplified expenses

You can avoid using complex calculations to work out your business expenses by using simplified expenses. Simplified expenses are flat rates that can be used for:

• vehicles
• working from home
• living on your business premises

Claim items you鈥檇 normally use for less than 2 years as allowable expenses, for example:

• stationery
• rent, rates, power and insurance costs

For equipment you keep to use in your business, for example computers or printers, claim:

• allowable expenses if you use cash basis accounting
• capital allowances if you use traditional accounting

You cannot claim for any non-business use of premises, phones or other office resources.

Stationery

You can claim expenses for costs such as:

• phone, mobile, fax and internet bills
• postage
• stationery
• printing
• printer ink and cartridges
• computer software your business uses for less than 2 years
• computer software if your business makes regular payments to renew the licence (even if you use it for more than 2 years)

Claim other software for your business as capital allowances, unless you use cash basis.

If you鈥檙e not sure whether a business cost is an allowable expense contact HM Revenue and Customs (HMRC).

Rents, rates, power and insurance costs

You can claim expenses for costs such as:

• rent for business premises
• business and water rates
• utility bills
• property insurance
• security
• using your home as an office (only the part that鈥檚 used for business)

If you鈥檙e not sure whether a business cost is an allowable expense contact HMRC.

Business premises

If you build, buy or lease a structure you may be able to claim structures and buildings allowance.

You can claim expenses for repairs and maintenance of business premises and equipment.

For alterations to install or replace equipment, claim:

• allowable expenses if you use cash basis accounting
• capital allowances if you use traditional accounting

If you use traditional accounting you can claim capital allowances for some integral parts of a building, for example water heating systems.

If you鈥檙e not sure whether a business cost is an allowable expense contact HMRC.

You can claim allowable business expenses for costs such as:

• vehicle insurance
• repairs and servicing
• fuel
• parking
• hire charges
• vehicle tax licence fees
• breakdown cover
• train, bus, tram, air and taxi fares
• hotel rooms
• meals on overnight business trips

You cannot claim for:

• non-business driving or travel costs
• fines or penalty charges
• travel between home and work

If you鈥檙e not sure whether a business cost is an allowable expense contact HM Revenue and Customs (HMRC).

Buying vehicles

If you use traditional accounting and buy a vehicle for your business, you can claim capital allowances on the cost of the purchase.

If you use cash basis accounting and buy a car for your business, claim the cost as a capital allowance as long as you鈥檙e not using simplified expenses.

For all other types of vehicle, claim the cost as allowable expenses.

You can claim allowable business expenses for costs such as:

• uniforms
• protective clothing needed for your work
• costumes for actors or entertainers

You cannot claim for everyday clothing (even if you wear it for work).

If you鈥檙e not sure whether a business cost is an allowable expense contact HM Revenue and Customs (HMRC).

You can claim allowable business expenses for costs such as:

• employee and staff salaries
• bonuses
• pensions
• benefits
• agency fees
• subcontractors
• employer鈥檚 National Insurance
• training courses related to your business

You cannot claim for carers or domestic help, for example nannies.

If you鈥檙e not sure whether a business cost is an allowable expense contact HM Revenue and Customs (HMRC).

You can claim allowable business expenses for costs such as:

• goods for resale (stock)
• raw materials
• direct costs from producing goods

You cannot claim for:

• any goods or materials bought for private use
• depreciation of equipment

If you鈥檙e not sure whether a business cost is an allowable expense contact HM Revenue and Customs (HMRC).

Accountancy, legal and other professional fees can count as allowable business expenses.

You can claim for costs such as:

• hiring of accountants, solicitors, surveyors and architects only for business reasons
• professional indemnity insurance premiums

You cannot claim for:

• legal costs of buying property and machinery - if you use traditional accounting, claim for these costs as capital allowances
• fines for breaking the law
• the cost of preparing and submitting your Self Assessment tax return

If you鈥檙e not sure whether a business cost is an allowable expense contact HM Revenue and Customs (HMRC).

Bank, credit card and other financial charges

You can claim for business costs such as:

• bank, overdraft and credit card charges
• interest on bank and business loans
• hire purchase interest
• leasing payments
• alternative finance payments, for example Islamic finance

You cannot claim for repayments of loans, overdrafts or finance arrangements.

If you鈥檙e not sure whether a business cost is an allowable expense contact HMRC.

Insurance policies

You can claim for any insurance policy for your business, for example public liability insurance.

When your customer does not pay you

If you鈥檙e using traditional accounting, you can claim for amounts of money you include in your turnover but will not ever receive (鈥榖ad debts鈥�). However, you can only write off these debts if you鈥檙e sure they will not be recovered from your customer in the future.

You cannot claim for:

• debts not included in turnover
• debts related to the disposal of fixed assets, for example land, buildings, machinery
• bad debts that are not properly calculated, for example you can not just estimate that your debts are equal to 5% of your turnover

Bad debts cannot be claimed if you use cash basis accounting because you鈥檝e not received the money from your debtors. With cash basis, you only record income on your return that you鈥檝e actually received.

You can claim allowable business expenses for costs such as:

• advertising in newspapers or directories
• bulk mail advertising (mailshots)
• free samples
• website costs

You cannot claim for:

• entertaining clients, suppliers and customers
• event hospitality
• most gifts

If you鈥檙e not sure whether a business cost is an allowable expense contact HM Revenue and Customs (HMRC).

Subscriptions

You can claim for costs such as:

• trade or professional journals
• trade body or professional organisation membership if related to your business

You cannot claim for:

• payments to political parties
• gym membership fees
• donations to charity - but you may be able to claim for sponsorship payments

If you鈥檙e not sure whether a business cost is an allowable expense contact HM Revenue and Customs (HMRC).

You can claim allowable business expenses for training that helps you:

• improve skills and knowledge you currently use for your business
• keep up-to-date with technology used in your industry聽
• develop new skills and knowledge related to changes in your industry
• develop new skills and knowledge to support your business - this includes administrative skills

You cannot claim for training courses that help you:

• start a new business
• expand into new areas of business that are not directly related to your industry

If you are still unsure what training you can claim for, read about more examples of what you can and cannot claim for.

Keep records of all your business expenses as proof of your costs.

Tell HM Revenue and Customs (HMRC) your allowable expenses for the tax year on your Self Assessment tax return.

You do not need to send in proof of expenses when you submit your tax return. But you should keep proof and records so you can show them to HMRC if asked.