In this informative article, you will learn all about what expenses can be claimed against tax. Understanding which expenses are eligible for tax deductions can significantly reduce your tax bill. Whether you’re self-employed or an employed individual, there are specific rules and guidelines to follow. From premises and course materials to travel costs and professional memberships, we will cover a non-exhaustive list of possible expenses that can potentially save you money. So, let’s dive in and discover how to make the most of your tax deductions.
Expense Basics for Tax
Expenses are an essential aspect of reducing your tax bill. The key principle to remember when claiming expenses for the self-employed is that the expense must be “Wholly and Exclusively” for business purposes. It can sometimes be confusing when an expense is both private and business-related, but in those cases, it is possible to apportion the expense to make it “Wholly and Exclusively” for business purposes. However, there are certain expenses that cannot be apportioned and are disallowed. Unfortunately, there is no definitive list of deductible and non-deductible items in the statute, making it necessary to evaluate each expense on a case-by-case basis.
For employed individuals on a PAYE basis, the requirement is for the expense to be “Wholly, Exclusively, and Necessarily” incurred. This means that very few expenses can be claimed, as HMRC argues that if an expense is necessary, the employer would cover it. However, those on PAYE may also have some self-employment income, allowing them to offset expenses in that aspect of their work. For sole traders, there is the possibility of claiming the greater of £1,000 or the actual expenses incurred under the HMRC Trading Allowance. This provision can be useful if your expenses are not particularly high.
Expenses Checklist
Here is a non-exhaustive list of possible expenses that can be claimed:
Premises
Expenses incurred for renting or using premise for business can be claimed.
Refreshments
If you provide refreshments for yourself and your employees during work, the cost of these refreshments can be claimed as an expense.
Training
Expenses related to training for your business can be claimed.
Advertising
Costs associated with advertising your products or services, including online advertisements, flyers, or promotional materials, are deductible.
IT and internet
Expenses related to IT equipment, software, or internet services necessary for your business operations can be claimed.
Phone
The cost of business-related phone calls can be claimed as an expense.
Mobile phone
If you use a mobile phone for business purposes, the cost of the phone and its service can be claimed.
Use of home for business
If you use a portion of your home exclusively for business purposes, you can claim expenses for that portion of your home, including rent, mortgage interest, utilities, and maintenance costs.
Travel
Expenses related to business travel can be claimed. There are special rules for regular journeys, so it is important to consult the specific guidelines.
Car costs
If you use your car for business purposes, you can claim expenses such as fuel, insurance, maintenance, and parking fees. However, there are specific rules that apply, so it is important to understand them before claiming these expenses.
Insurances
The cost of insurances related to your business, such as professional liability insurance or equipment insurance, can be claimed.
Journals
Expenses related to purchasing professional journals or publications can be claimed.
Reference books
The cost of purchasing reference books or educational materials relevant to your business can be claimed.
Professional memberships
Membership fees for professional organizations or associations directly related to your business can be claimed.
CPD (including related travel and accommodation)
Expenses associated with continuing professional development (CPD) activities, such as workshops, courses, or conferences, including travel and accommodation costs, can be claimed.
Mentoring
Fees paid for mentoring or coaching services directly related to your business can be claimed.
Stationery
The cost of stationery items and office supplies, such as pens, paper, or printer ink, can be claimed.
Printing (e.g., business cards)
Expenses related to printing marketing materials, business cards, or stationery with your business details can be claimed.
Web design and hosting
The cost of website design, development, and hosting services for your business can be claimed.
Professional supervision
Fees paid for professional supervision or consultation directly related to your business can be claimed.
Clothing
If you need to purchase specific clothing or uniforms for your work, the cost of these items can be claimed. However, be aware that there restrictions when it comes to claiming for work clothing.
Small tools and Equipment
The cost of purchasing or maintaining small tools and equipment for your business can be claimed. For large and expensive equipment the claim is made through Capital allowance.
Employing assistance
If you employ someone to assist you in your business, the costs associated with employing them can be claimed. It is important to consider the employment status of the individual before claiming these expenses.
Travel Expenses
Travel expenses represent a special case, particularly when it comes to habitual journeys. Regardless of whether you travel by car or public transport, habitual journeys cannot be claimed as a deductible expense. Here are some important points to consider regarding travel expenses:
Special case with habitual journeys not claimable
Habitual journeys, such as commuting to and from a place where you are employed under PAYE, cannot be claimed as expenses.
Eligibility of travel expenses for deduction
Travel expenses can be claimed for journeys to different places or locations where you carry out work. However, it is essential to consult the specific guidelines to understand what can and cannot be claimed.
Expenses that Generally Can’t be Claimed
While there are many expenses that can be claimed against tax, there are also some expenses that generally cannot be claimed. It is important to be aware of these expenses to avoid any incorrect claims or potential penalties. Here are some examples of expenses that generally cannot be claimed:
Medical, health, and accident insurance
Expenses related to personal medical, health, or accident insurance cannot be claimed against tax.
Medical and surgical costs
Even if the medical or surgical costs are necessary for you to continue working or return to work earlier, they generally cannot be claimed as tax-deductible expenses.
Initial costs of training
Expenses incurred for the initial training or qualification to become qualified in your profession cannot be claimed.
Holidays
Personal holidays or vacations cannot be claimed as tax-deductible expenses.
Other non-deductible expenses
There may be other expenses that do not qualify as deductible for tax purposes. It is important to consult the specific guidelines and regulations to determine what can and cannot be claimed.