If you are self-employed then you will know there are essential costs you will need to pay to keep your business running smoothly. However, every year hundreds of people are missing out on tax savings because they are unaware of allowable expenses that are tax deductible.
What does tax deductible mean?
Some costs for businesses are classed as ‘allowable expenses’. This means they are tax deductible and you won’t need to pay tax on the money you’ve spent. For example, if you made £40,000 last year, but you spent £10,000 on allowable expenses, you will only be taxed on the balance of £30,000 after the allowable expenses have been deducted.
What costs can I claim as allowable expenses?
Examples of some of the things you can claim as allowable expenses include:
- Office costs e.g. stationery or phone bills
- Travel costs e.g. fuel or parking
- Staff costs e.g. salaries or subcontractor costs
- Things you buy to sell on e.g. stock
- Costs for your business premises e.g. heating and lighting
However, there are other less obvious items you might not be aware of that you can also claim as allowable expenses. These include:
1. Membership fees and subscriptions
If you are a member of a professional body and have to pay a fee or subscription for this in order to do your job, then you might be eligible for tax relief. Approved professional organisations include things like The Hairdressing Council, Institution of Gas Engineers and law societies. However, you cannot claim tax relief on life membership subscriptions, or for fees or subscriptions you have not paid for yourself or to professional organisations that have not been approved by HMRC.
You can find a full list of approved professional bodies for tax relief on the government’s website here.
2. Uniforms or other essential items of clothing
If you wear a uniform, require protective clothing to do your work or you are an actor or entertainer that wears costumes, you can claim these as allowable expenses. However, you cannot claim for everyday clothing, even if you wear it to work.
3. Insurance and bank charges
Bank, overdraft and credit card charges along with interest on bank and business loans are all allowable expenses. You can also claim for interest on hire purchase agreements, leasing payments and alternative finance payments, such as Islamic finance.
Any insurance policies you have for operating your business, for example public liability insurance, are also included. For further information about legal and financial costs and allowable expenses, please take a look at this page on the government’s website.
4. Advertising and marketing
Promoting your business is essential for making sure potential customers are aware that you exist. Advertising and marketing to achieve this are therefore allowable expenses. This includes:
- Advertising in newspapers or directories
- Bulk mail advertising i.e. mailshots
- Supplying free samples
- Website costs
5. Training
If you need to undertake training to improve skills or knowledge that you use in your business, then you can claim allowable expenses for this. However, the training courses must be related to your business. This means you can’t decide to book a photography course for example if this has nothing to do with your actual business.
There are other exceptions too – you cannot claim for training courses that help you to start a new business or expand into new areas of the business, including anything related to your current business.
If you need further information or advice about allowable expenses and tax deductions, then we are always here to help. Please give us a call on 01892 559480, or get in touch via our online enquiry form.
